SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 23, 1997
GOLF HOST RESORTS, INC.
(Exact name of registrant as specified in its charter)
Colorado 2-64309 84-0631130
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
P.O. Box 3131, Durango, Colorado 81302
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 259-2000
Not Applicable
(Former name or former address, if changed since last report)
Item 1. Changes in Control of Registrant.
On June 23, 1997, a merger and stock purchase transaction occurred,
pursuant to that certain Stock Purchase and Merger Agreement, dated April 25,
1997 (the "Merger Agreement"), by and among Golf Hosts, Inc., a Florida
corporation ("GHI"), Stanley D. Wadsworth, Brenton Wadsworth, C. James McCormick
and TM Golf Hosts, Inc., a Florida corporation ("TM"), by which the registrant
became a wholly-owned indirect subsidiary of Golf Host Holdings, Inc., a
Delaware corporation ("Holdings"). A group of individual investors led by Barry
Sternlicht is the record and beneficial owner of 74 percent of the issued and
outstanding capital stock of Holdings.
Prior to the transaction, GHI owned 80 percent of the issued and
outstanding capital stock of the registrant. The remaining 20 percent of the
registrant's issued and outstanding capital stock, as well as a controlling
interest in GHI, was held by Stanley D. Wadsworth, Brenton Wadsworth and C.
James McCormick (collectively, the "Control Shareholders"). Pursuant to the
Merger Agreement, (i) GHI acquired the remaining shares of the registrant from
the Control Shareholders, and (ii) TM, a wholly-owned subsidiary of Holdings,
was merged with and into GHI with GHI being the surviving corporation. GHI's
existing shares were converted into the right to receive cash, and TM's shares
were each converted into 100 shares of GHI.
Total consideration for the acquisition was $54,127,981.03 cash (subject to
adjustment), which was obtained pursuant to a Loan Agreement, dated April 20,
1997 (the "Loan Agreement"), between the registrant and Golf Trust of America,
L.P., a Delaware limited partnership ("GTA"). The Loan Agreement provides for a
revolving line of credit of up to $78,975,000, from which the merger
consideration was obtained. The term of the loan is 30 years, and is secured by
certain real and personal property of the registrant and a guaranty by GHI.
Descriptions of the Merger Agreement and the Loan Agreement and the
transactions contemplated thereunder do not purport to be complete. Included as
exhibits hereto are the Merger Agreement and the Loan Agreement and, as such,
the foregoing description is qualified in its entirety by reference to and
incorporation of the terms and provisions contained in those exhibits.
Item 4. Changes in Registrant's Certifying Accountant.
Effective July 8, 1997, the registrant has dismissed Arthur Andersen LLP
("Arthur Andersen") as the registrant's independent accountant, and has retained
Price Waterhouse as the new independent accountant for the registrant. The
change was implemented solely as a result of the change in control discussed
above. Arthur Andersen's reports on the registrant's financial statements for
the past two years contained no adverse opinion or disclaimer of opinion, and
were not qualified or modified as to uncertainty, audit scope or accounting
principles. The change of accountants was duly approved by the board of
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directors of the registrant. During the registrant's two most recent fiscal
years there have been no disagreements with Arthur Andersen on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
The following documents are filed as exhibits hereto:
Exhibit 2.1 Stock Purchase and Merger Agreement, dated April 25, 1997,
by and among Golf Hosts, Inc., Stanley D. Wadsworth, Brenton
Wadsworth, C. James McCormick and TM Golf Hosts, Inc.
Exhibit 99.1 Loan Agreement, dated April 20, 1997, between Golf Host
Resorts, Inc. and Golf Trust of America, L.P.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
GOLF HOST RESORTS, INC.
(Registrant)
Date: July 8, 1997 By: /s/ Merrick R. Kleeman
Name: Merrick R. Kleeman
Title: President
STOCK PURCHASE AND MERGER AGREEMENT
among
GOLF HOSTS, INC.,
STANLEY D. WADSWORTH,
BRENTON WADSWORTH,
C. JAMES MCCORMICK,
and
TM GOLF HOSTS, INC.
Dated as of April 25, 1997
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS
1.1 Definitions....................................................... 2
ARTICLE II
THE MERGER
2.1 Surviving Corporation............................................. 11
2.2 Articles of Incorporation......................................... 12
2.3 By-Laws........................................................... 12
2.4 Directors......................................................... 12
2.5 Officers.......................................................... 12
2.6 Effective Time.................................................... 12
ARTICLE III
CONVERSION OF SHARES AND PURCHASE OF RESORT SHARES
3.1 Company Shares of Common Stock.................................... 12
3.2 Dissenting Shares................................................. 13
3.3 Exchange Agent.................................................... 13
3.4 Conversion of Purchaser Stock..................................... 15
3.5 Purchase of the Resort Shares..................................... 15
ARTICLE IV
CLOSING OF MERGER
4.1 Closing........................................................... 15
4.2 Calculation of Purchaser's Closing Payment........................ 15
4.3 Determination of Purchaser's Closing Payment...................... 18
4.4 Delivery of Stock; Payment........................................ 19
4.5 Accounts Receivable............................................... 19
4.6 Prorations........................................................ 20
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF EACH RESORT HOLDER
5.1 Title to Shares................................................... 21
5.2 Due Authorization................................................. 21
5.3 Consents and Approvals; Authority Relative to this Agreement...... 21
5.4 Broker's Fees..................................................... 22
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
6.1 Due Incorporation; Capitalization................................. 22
6.2 Financial Statements.............................................. 24
6.3 Reports........................................................... 25
6.4 Right of First Refusal............................................ 25
6.5 Subsidiaries...................................................... 26
6.6 No Violation; Consents and Approvals.............................. 26
6.7 Preservation of Business.......................................... 27
6.8 Real Property..................................................... 27
6.9 Intellectual Property Rights...................................... 32
6.10 Contracts........................................................ 33
6.11 Insurance. ...................................................... 34
6.12 Benefit Plans.................................................... 35
6.13 Permits.......................................................... 37
6.14 Taxes ........................................................... 37
6.15 Environmental Matters............................................ 39
6.16 Customer and Supplier Relationships.............................. 41
6.17 Litigation; Compliance with Laws................................. 41
6.18 Labor Matters.................................................... 41
6.19 No Adverse Change................................................ 42
6.20 Tangible Property and Title...................................... 42
6.21 Bank Accounts.................................................... 43
6.22 Insolvency Proceedings........................................... 43
6.23 Broker's Fees.................................................... 44
6.24 Accuracy of Statements........................................... 44
6.25 Liabilities Relating to Former Shareholders...................... 44
6.26 Management Agreements............................................ 44
6.27 Principal Place of Business...................................... 44
6.28 Opinion of Financial Advisor..................................... 45
6.29 Shareholder Consent.............................................. 45
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF PURCHASER
7.1 Due Incorporation................................................. 45
7.2 Due Authorization................................................. 45
7.3 Consents and Approvals; Authority Relative to this Agreement...... 46
7.4 Hart-Scott-Rodino................................................. 46
7.5 Brokers Fees...................................................... 46
7.6 Investment........................................................ 46
ARTICLE VIII
COVENANTS
8.1 Access to Information and Facilities.............................. 47
8.2 Preservation of Business.......................................... 47
8.3 Exclusivity....................................................... 50
8.4 Shareholder Matters............................................... 50
8.5 Deposit Amount.................................................... 51
8.6 Best Efforts; Further Assurances; Cooperation..................... 51
8.7 Supplemental Information; Notice of Developments.................. 52
8.8 Maintenance of Insurance.......................................... 53
8.9 Resignation of Directors and Officers............................. 53
8.10 Repayment of Debt................................................ 54
8.11 Discharge of Liens, etc.......................................... 54
8.12 State Takeover Laws.............................................. 54
8.13 Vacation Accrual................................................. 54
8.14 Reserved......................................................... 54
8.15 Financial Statements............................................. 54
8.16 Sandpiper Expansion.............................................. 54
8.17 Environmental Matters............................................ 55
8.18 Real Property.................................................... 55
8.19 Post-Closing Covenants........................................... 55
Innisbrook Rental Pool Master Lease Agreement.......................... 56
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS
OF PURCHASER
9.1 Warranties True as of Both Present Date and Closing Date.......... 57
9.2 Compliance with Agreements and Covenants.......................... 57
9.3 Required Consents................................................. 57
9.4 No Prohibition.................................................... 57
9.5 Shareholder Approval.............................................. 58
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9.6 No Material Adverse Change........................................ 58
9.7 Financial Statements; Financial Condition......................... 58
9.8 Reserved.......................................................... 58
9.9 Repayment of Indebtedness; Discharge of Liens..................... 58
9.10 Reserved......................................................... 58
9.11 Liquor License................................................... 59
9.12 Reserved......................................................... 59
9.13 Dissenting Shares................................................ 59
9.14 Title Commitment and Survey...................................... 59
9.15 Documents........................................................ 60
9.16 Litigation....................................................... 62
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE COMPANY AND THE RESORT HOLDERS
10.1 Warranties True as of Both Present Date and Closing Date......... 62
10.2 Compliance with Agreements and Covenants......................... 62
10.3 No Prohibition................................................... 63
10.4 Documents........................................................ 63
ARTICLE XI
TERMINATION
11.1 Termination...................................................... 64
11.2 Effect of Termination............................................ 65
ARTICLE XII
SURVIVAL AND REMEDY; INDEMNIFICATION
12.1 Survival......................................................... 66
12.2 Indemnification by the Company, the Resort Holders
and the Shareholders........................................... 67
12.3 Indemnification by Purchaser and the Surviving Corporation....... 68
12.4 Third-Party Claims............................................... 69
12.5 Purchaser-Resort Holder-Shareholder Claims....................... 70
12.6 Indemnification Limits........................................... 71
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ARTICLE XIII
MISCELLANEOUS
13.1 Expenses......................................................... 71
13.2 Amendment........................................................ 72
13.3 Notices.......................................................... 72
13.4 Representative................................................... 74
13.5 Waivers.......................................................... 75
13.6 Counterparts..................................................... 75
13.7 Interpretation................................................... 75
13.8 APPLICABLE LAW................................................... 76
13.9 Binding Agreement................................................ 76
13.10 No Third Party Beneficiaries.................................... 76
13.11 Enforcement of this Agreement................................... 76
13.12 Publicity....................................................... 76
13.13 Further Assurances.............................................. 76
13.14 Entire Understanding............................................ 77
13.15 Jurisdiction; Attorneys' Fees................................... 77
13.16 Severability.................................................... 77
13.17 Construction.................................................... 77
EXHIBITS
Exhibit A - Articles and Plan of Merger
Exhibit B - Form of Shareholder Consent and Agreement
Exhibit C - Deposit Escrow Agreement
Exhibit D - Escrow Agreement
Exhibit E - Exchange Agent Agreement
Exhibit F - Closing Checklist
Exhibit G - Surveyor's Certificate
Exhibit H - Merger Consideration
Exhibit I - Letter of Transmittal
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SCHEDULES
Schedule I - Shareholders and Resort Holders
Schedule II - Net Value Calculation
Schedule III - Tamarron Assets
Schedule IV - Approved Sandpiper Expenditures and Development Plan
Schedule V - Long-term Receivables
Schedule 6.1 - Due Incorporation; Capitalization; Distributions;
Subsidiaries
Schedule 6.2 - Financial Statements; Liabilities
Schedule 6.5 - Investments
Schedule 6.6 - No Violation; Consents and Approvals
Schedule 6.8 - Real Property
Schedule 6.9 - Intellectual Property Rights
Schedule 6.10 - Contracts
Schedule 6.11 - Insurance
Schedule 6.12 - Benefit Plans
Schedule 6.13 - Permits
Schedule 6.14 - Taxes
Schedule 6.15 - Environmental Matters
Schedule 6.17 - Litigation, Compliance with Law
Schedule 6.18 - Labor Matters
Schedule 6.19 - No Adverse Change
Schedule 6.20 - Tangible Property
Schedule 6.21 - Bank Accounts
Schedule 6.26 - Amounts Owned Hilton; Section 8.08.1 Calculation
Schedule 8.2 - Preservation of Business
Schedule 8.19 - Persons Entitled to Resort Benefits
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STOCK PURCHASE AND MERGER AGREEMENT
THIS STOCK PURCHASE AND MERGER AGREEMENT (this "Agreement") is made as
of the 25th day of April, 1997, by and among Golf Hosts, Inc., a Florida
corporation (the "Company"), Stanley D. Wadsworth ("SW"), Brenton Wadsworth
("BW") and C. James McCormick ("JM" and together with SW and BW, the "Resort
Holders") and TM Golf Hosts, Inc., a Florida corporation (the "Purchaser").
Certain capitalized terms used herein are defined in Article I.
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company has reviewed a form of
this Agreement and has authorized its execution by the Company and the merger of
Purchaser with and into the Company (the "Merger"), with the Company being the
surviving corporation, pursuant to the terms and conditions contained herein and
in accordance with the Florida Business Corporation Act (the "BCA") and the
articles and plan of merger to be filed in the State of Florida in a form
approved by the Boards of Directors of the Company and Purchaser (the "Articles
and Plan of Merger") attached hereto as Exhibit A;
WHEREAS, the Board of Directors of Purchaser has approved this
Agreement and the Articles and Plan of Merger pursuant to the terms and
conditions contained herein and in accordance with the BCA;
WHEREAS, the Board of Directors of the Company has recommended to the
Shareholders of the Company that the Shareholders vote to approve the Merger
pursuant to this Agreement at a special meeting of Shareholders of the Company
to be called and held pursuant to the provisions hereof and in accordance with
the requirements of the BCA and the Articles of Incorporation and By-Laws of the
Company;
WHEREAS, the Board of Directors of Purchaser has recommended to the
shareholders of Purchaser that the shareholders vote to approve the Merger
pursuant to this Agreement at a special meeting of shareholders of Purchaser to
be called and held pursuant to the provisions hereof and in accordance with the
requirements of the BCA and the Articles of Incorporation and By-Laws of
Purchaser;
WHEREAS, the Shareholders listed on Schedule I have approved and
authorized this Agreement and the Merger, and the Company has delivered to
Purchaser a Shareholder Consent and Agreement executed by each such Shareholder
("Shareholder Consent"), in the form of Exhibit B hereto;
WHEREAS, the Resort Holders are the owners of 1,000 shares of the
common stock, par value $1.00 per share (the "Resort Shares"), of Golf Host
Resorts, Inc., a Colorado corporation ("Resort"), constituting 20% of the issued
and outstanding shares of common stock of Resort; and
WHEREAS, concurrently with the Merger, Purchaser will purchase the
Resort Shares from the Resort Holders and the Resort Holders will sell the
Resort Shares to Purchaser, all in accordance with the terms and conditions set
forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, agreements and warranties herein contained, the parties agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms shall have the following meanings
for the purposes of this Agreement:
"Affiliate" means with respect to any Person, (a) any Person which,
directly or indirectly, controls, or is controlled by, or is under common
control with, such Person, or (b) any Person who is a director, or executive
officer (i) of such Person, (ii) of any subsidiary of such Person, or (iii) of
any Person described in clause (a) above, or with respect to any Shareholder,
the Company and its Subsidiaries; provided, that any Affiliate of a corporation
shall be deemed an Affiliate of such corporation's Shareholders. For purposes of
this definition, "control" of a Person shall mean the power, direct or indirect,
(i) to vote or direct the voting of more than 50% of the outstanding shares of
voting stock or voting units of such Person, or (ii) to direct or cause the
direction of the management and policies of such Person, whether by contract or
otherwise.
"Agreement" means this Agreement, including the Disclosure Schedule and
all other exhibits and schedules hereto, as amended from time to time.
"Authority" means any governmental, regulatory or administrative body,
agency, subdivision or authority, any court or judicial authority, any public,
private or industry regulatory authority, whether in the United States or any
foreign country and whether national, Federal, state or local or otherwise, or
any Person lawfully empowered by any of the foregoing to enforce or seek
compliance with any Regulation.
"Business" means the business and operations of the Company and its
Subsidiaries as conducted as of the date hereof or as specifically proposed to
be conducted by the Company and its Subsidiaries with respect to the Sandpiper
Expansion and the Estates at Tamarron- Pine Ridge at the date of this Agreement
and/or the Closing Date.
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"Closing" means the consummation of the transactions contemplated
herein.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock, $.30 par value per share, of the
Company.
"Contract" means any binding contract, lease, agreement, indenture,
mortgage, note, bond, instrument or understanding, whether written or oral.
"Current Assets" means cash and cash equivalents, prepaid items to the
extent that such items benefit Purchaser post-Closing (excluding any accrual or
prepayment of deferred expenses relating to Extinguished Debt and any
pre-opening expenses or other amounts relating to the Management Agreements),
inventories and receivables (other than the current portion of Long-term
Receivables), determined in accordance with GAAP.
"Current Liabilities" means accounts payable, accrued expenses,
deposits and prepaid fees, the current portion of Long-term Obligations and
other current liabilities (other than the current portion of the Extinguished
Debt), determined in accordance with GAAP and reflecting all reserves and
accruals normally reflected in a year-end balance sheet.
"Deposit Amount" means the $500,000 (together with interest accrued
thereon) deposited by Purchaser with the Escrow Agent in accordance with the
terms of the Deposit Escrow Agreement and Section 8.5 hereof substantially in
the form attached hereto as Exhibit C.
"Disclosure Schedule" means the Disclosure Schedule attached hereto, as
amended, modified or supplemented pursuant to this Agreement. References to
specific Schedule numbers are references to specific sections of the Disclosure
Schedule, which is comprised of all such Schedules.
"Dollars" or numbers preceded by the symbol "$" means amounts in United
States Dollars.
"Environmental Law" means any Regulation which relates to, or otherwise
imposes liability or standards of conduct concerning, discharges, Releases or
threatened Releases of noises, odors or any pollutants, contaminants, Hazardous
Materials or toxic wastes, substances or materials into ambient air, water or
land, or otherwise relating to the manufacture, processing, generation,
distribution, use, treatment, storage, disposal, cleanup, transport or handling
of pollutants, contaminants, Hazardous Materials or toxic wastes, substances or
materials.
"Environmental Liabilities and Costs" means all Losses from any claim,
by any Person, whether based on Contract, tort, implied or express warranty,
strict liability,
3
criminal or civil statute, including under any Environmental Law, Environmental
Permit, Environmental Lien, Order or agreement with any Authority, arising from
environmental, health or safety conditions, or the Release of a Hazardous
Material into the environment.
"Environmental Lien" means any Lien in favor of any Authority for
Environmental Liabilities and Costs or Remedial Action.
"Environmental Permit" means any permit, license, approval, consent or
other authorization required by or pursuant to any applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means First Union National Bank of Florida.
"Escrow Agreement" means the Escrow Agreement, to be dated the Closing
Date among the Company, the Escrow Agent, the Representative, the Resort Holders
and Purchaser, substantially in the form of Exhibit D hereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agent" means First Union National Bank of Florida or such
other entity reasonably acceptable to the parties hereto.
"Exchange Agent Agreement" means the Exchange Agent Agreement by and
among the Company, the Exchange Agent, the Representative and Purchaser,
substantially in the form of Exhibit E hereto.
"Financial Statements" means the following:
(i) the audited consolidated financial statements of the
Company and its Subsidiaries as of December 31, 1996 (including all
notes thereto) included in Schedule 6.2(a), consisting of the
consolidated balance sheet at such date and the related consolidated
statements of income, retained earnings and cash flow for the year then
ended; and
(ii) the unaudited consolidated financial statements of the
Company and its Subsidiaries for January 31, 1997 and each month
following January 31, 1997, consisting of the consolidated balance
sheet at such date and the related consolidated statements of income
and cash flow.
"GAAP" means the U.S. generally accepted accounting principles at the
time in effect, consistently applied.
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"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Hazardous Material" means (i) any "hazardous substance," as defined by
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
and the Superfund Amendments and Reauthorization Act of 1986 (together, as
amended, "CERCLA"); (ii) any "hazardous waste," as defined by the Resource
Conservation and Recovery Act, as amended; (iii) any petroleum product or
fractions thereof; or (iv) any pollutant, contaminant or hazardous, dangerous or
toxic chemical, material or substance within the meaning of any other applicable
Federal, state or local law, regulation, ordinance or requirement (including
consent decrees and administrative orders) relating to or imposing liability or
standards of conduct concerning any hazardous, toxic or dangerous waste,
substance or material, all as in effect now or as of the Closing Date.
"Hilton" means Hilton Hotels Corporation.
"Indebtedness" with respect to any Person means any obligation of such
Person for borrowed money whether or not reflected on the face of the balance
sheet contained in the Financial Statements, and in any event shall include (i)
any obligation incurred for all or any part of the purchase price of property or
other assets or services or for the cost of property or other assets constructed
or of improvements thereto, other than accounts payable included in current
liabilities and incurred in the ordinary course of business, (ii) the face
amount of all letters of credit issued for the account of such Person, (iii)
obligations (whether or not such Person has assumed or become liable for the
payment of such obligation) secured by Liens, (iv) capitalized lease
obligations, (v) all guarantees of such Person, (vi) all accrued interest, fees
and charges in respect of any Indebtedness, and (vii) all prepayment premiums
and penalties, and any other fees, expenses, indemnities and other amounts
payable as a result of the prepayment and/or discharge of any Indebtedness.
"indemnitee" means the Person entitled to, or claiming a right to,
indemnification under Article XII.
"indemnitor" means the Person claimed by the indemnitee to be obligated
to provide indemnification under Article XII.
"Innisbrook Property" means that certain parcel of land and
improvements thereon consisting of approximately 757.88 acres lying in Sections
24 and 25, Township 27 South, Range 15 East, and Section 30 Township 27 South,
Range 16 East located in Pinellas County, Florida, as more particularly
described in Schedule 6.8(a).
"IRS" means the Internal Revenue Service.
"Knowledge of the Company" means the actual knowledge, after diligent
and reasonable inquiry and after performance of the duties reasonably within the
scope of each
5
such person's responsibility in the position held, by reference, in part, to the
company they manage, of Richard S. Ferreira, Stanley D. Wadsworth, Brenton
Wadsworth, C. James McCormick, Richard L. Akin and Dominic Bengivengo, with
respect to the Company and its Subsidiaries.
"Lien" means any lien, mortgage, pledge, deed, assignment,
hypothecation, easement, restriction, interest, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary (including any
conditional sale or other title retention agreement, any lease in the nature
thereof).
"Long-term Contingencies" means long term contingencies, determined in
accordance with GAAP, valued by reference to the total obligation or liability
without reduction for any related asset or right.
"Long-term Obligations" means long term debt and other obligations
(other than Long-term Contingencies, Extinguished Debt, the Long-term
Receivables payable by the Tamarron Association of Condominium Owners, Inc. and
related unamortized debt discount and expenses and Current Liabilities),
determined in accordance with GAAP whether or not reflected on the face of the
balance sheet contained in the Financial Statements, valued by reference to the
total obligation or liability without reduction for any related asset or right.
"Long-term Receivables" means the long term receivables of the Company
and its Subsidiaries (including the current portion thereof) as of the Closing
Date or incurred post-closing with respect to the Tamarron Association of
Condominium Owners, Inc., as set forth on Schedule V and reflected in the Final
Determination, determined in accordance with GAAP, including all receivables
subject to Long-term Obligations, Long-term Contingencies and Current
Liabilities and all receivables from the Innisbrook Condominium Association,
Inc. and the Tamarron Association of Condominium Owners, Inc. and including all
principal amounts, and interest thereon from and after the Closing Date.
"Loss" or "Losses" means any and all actual losses (including actual
losses in value), liabilities, costs, damages, penalties and expenses (including
attorneys' fees and expenses and litigations costs), and any legal or other
expenses reasonably incurred in connection with investigating (but only to the
extent the losses arising from any investigation are otherwise required to be
indemnified or entitled to indemnification pursuant to this Agreement) or
defending any claims or actions, whether or not resulting in any liability, but
not including indirect losses, liabilities, damages or expenses incurred due to
the interruption of the indemnitee's business or punitive damages, except where
such damages are incurred by or awarded to a third party making a claim against
an indemnitee.
"material" means any claim, circumstance or state of facts which
results in, or would reasonably be expected to result in Losses or the
expenditure or commitment of $50,000 or more, or which results in any material
limitation or restriction on the ability of the Company and its Subsidiaries to
conduct the Business.
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"Material Adverse Effect" means any circumstances, developments, state
of facts, occurrences or matters whose effect on the Business, properties,
assets, results, operations, customers, condition (financial and otherwise) and
prospects of the Company and its Subsidiaries considered as one, either alone or
in the aggregate, is or would reasonably expected to result in a material Loss.
"Net Value" means the difference between (a) Current Assets, less (b)
the sum of Long-term Obligations, Long-term Contingencies and Current
Liabilities, all determined in accordance with GAAP, applied in a manner
consistent with the Company's audited consolidated financial statements at
December 31, 1996, and reflecting full year-end reserves, accruals and
adjustments in accordance with GAAP and calculated as set forth in Schedule II
hereto, provided, that, in determining Net Value, (a) the Tamarron Tax Liability
will be disregarded, (b) the Sandpiper Expenditures and any assets resulting
therefrom will be disregarded, (c) the transaction fees and expenses of the
Company and its Subsidiaries in connection with the transactions contemplated by
this Agreement will be fully satisfied or otherwise reflected.
"Permits" means any licenses, permits, registrations, variances,
interim permits, permit applications, certificates, approvals or other
authorizations under any Regulation required for the operation of the Business
as of the date hereof and/or the Closing Date.
"Person" means any individual, corporation, proprietorship, firm,
partnership, limited partnership, limited liability company, organization, joint
venture, trust, association, Authority or other entity.
"Real Property" means the Innisbrook Property, the Tamarron Property
and the Easement.
"Regulation" means any law, statute, regulation, ruling, rule, order or
permit, of, administered or enforced by or on behalf of any Authority.
"Related Agreements" means the Articles and Plan of Merger, the Deposit
Escrow Agreement, the Escrow Agreement, the Exchange Agent Agreement, the
Shareholder Consents, the Letters of Transmittal and any other Contract which is
or is to be entered into at the Closing or otherwise pursuant to this Agreement
or in connection with the transactions contemplated hereby and that is listed on
the closing checklist in substantially the form attached hereto as Exhibit F as
such closing checklist may be modified or supplemented by agreement of the
parties hereto, such agreement to be evidenced solely by the attachment hereto
of a revised closing checklist. The Related Agreements executed by a specific
Person shall be referred to as "such Person's Related Agreements," "its Related
Agreements" or another similar expression.
"Release" means any release, spill, emission, leaking, pumping,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment or into or
7
out of any property or assets owned or leased by the Company or its
Subsidiaries, including the movement of Hazardous Materials through or in the
air, soil, surface water, groundwater or property.
"Remedial Action" means all actions reasonably necessary to remedy or
prevent any Environmental Liabilities and Costs by (1) cleaning up, removing,
treating or in any other way addressing Hazardous Materials in the indoor or
outdoor environment; (2) preventing the Release or threat of Release or
minimizing the further release of Hazardous Materials so they do not migrate or
endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment; or (3) performing preremedial studies and investigations
and post-remedial monitoring and care.
"Resort" means Golf Host Resorts, Inc.
"Right of First Refusal" means the rights of Hilton under Section 9.04
of the Management Agreements.
"Sandpiper Expenditures" means the capital expenditures made by the
Company or Resort prior to the Closing Date, in connection with the proposed
nine-hole expansion of the Sandpiper Golf Course that have been made in
accordance with the approved Sandpiper expenditures and development plan
approved by Purchaser and attached hereto as Schedule IV; provided, that
Purchaser is consulted with respect to and afforded the opportunity to
participate in the development of the expansion and all expenditures as such
expenditures are incurred.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shareholders" means the holders of Shares.
"Shares" means the shares of common stock of the Company, par value
$.30 per share, issued and outstanding.
"Survey" means ALTA surveys prepared by a surveyor licensed in the
jurisdiction in which the Real Property is located and reasonably acceptable to
Purchaser, at the Company's sole cost and expense (not to exceed $110,000)
conforming to the 1992 Minimum Standard Detail Requirements of ALTA/ACSM Surveys
for Class A Properties, setting forth and depicting such matters and information
as Purchaser or the Title Company may require and certified by such surveyor in
substantially the form attached hereto as Exhibit G to be delivered by the
Company to the Surviving Corporation within six (6) months of the date hereof.
8
"Tamarron Tax Liability" means the amount representing all Federal,
state and local income Taxes that would be payable to any Authority by the
Company, Resorts or Purchaser if Resorts sold substantially all of its
properties, assets and rights that relate to the ownership and operation of the
Tamarron Resort for an aggregate purchase price of $10 million as of the Closing
Date. A general description of such properties, assets and rights relating to
the Tamarron Resort and their tax basis is set forth on Schedule III hereto.
"Tamarron Property" means that certain parcel of land and improvements
thereon consisting of approximately 677.5 acres lying in Sections 1, 2 and 12,
Township 37 North, Range 9 West, N.M.P.M., located in La Plata County, Colorado
as more particularly described in Schedule 6.8(a).
"Taxes" means all taxes, charges, fees, duties, levies or other
assessments, including, without limitation, income, gross receipts, net
proceeds, ad valorem, turnover, real and personal property (tangible and
intangible), sales, use, franchise, excise, value added, license, payroll,
unemployment, environmental, customs duties, capital stock, disability, stamp,
leasing, lease, user, recording, transfer, fuel, excess profits, occupational
and interest equalization, windfall profits, severance and employees' income
withholding and Social Security taxes imposed by the United States or any
foreign country or by any state, municipality, subdivision or instrumentality of
the United States or any foreign country or by any other tax Authority, and such
term shall include any interest, penalties or additions to tax attributable to
such Taxes.
"Title Commitment" means with respect to the Tamarron Property, the
commitment for an ALTA Owner's and Lender's Title Policy bearing File No.
L-2-0013-97 and having an effective date of February 18, 1997 and with respect
to the Innisbrook Property, the commitment for an ALTA Owner's and Lender's
Title Policy bearing Commitment No. C- 97020208 and having an effective date of
February 14, 1997, each prepared by the Title Company; along with copies of the
documents referenced therein and the related tax information, which are in form
and substance acceptable to Purchaser except that (i) the Company shall comply
with each of the requirements set forth in Schedule B, Section 1 thereof and
such other requirements imposed by Purchaser with respect to any matters not
currently reflected in the Title Commitment (it being understood that any
intervening title matters between the date hereof and the Closing Date will be
removed of record by the Company at its expense at or prior to the Closing Date)
and (ii) the Company shall obtain the elimination of items 1-6 of Schedule B-II
for the Tamarron Property and items 1 and 2 on Schedule B-II for the Innisbrook
Property (it being agreed that the Title Company shall be permitted to take
exception to shortages in area and underground easements not shown by visible
inspection).
"Title Company" means Stewart Title Company.
9
The following terms are defined in the indicated Sections:
Term Section
- ---- -------
"Aggregate Seller Proceeds" 4.2
"Articles and Plan of Merger" Recitals
"BCA" Recitals
"Benefit Plans" 6.12(b)
"Cash Consideration" 3.1
"Certificate" 3.3
"Certificate of Objections" 9.4
"Closing Date" 4.1
"Closing Estimation" 4.3
"Closing Seller Proceeds" 3.3
"Company" Preamble
"Construction Loan" 8.2(i)
"De Minimis Shareholder" 3.1
"Development Agreement" 6.8
"Dissenting Shares" 3.2
"Easement" 6.8
"Effective Time" 2.6
"Effluent Agreement" 6.8
"Engineering Reports" 6.8
"Escrow Amount" 4.2
"Exchange Fund" 3.3
"Extinguished Debt" 4.2
"Extinguished Debt Certificate" 4.2
"Fairness Opinion" 6.28
"Final Determination" 4.3
"First Amendment" 6.8
"Indemnification Period" 12.1
"Leases" 6.8
"Leased Real Property" 6.8
"Lender Pay-Off Letters" 4.2
"Letter of Transmittal" 3.3
"Liabilities" 6.2
"Management Agreements" 6.4
"Material Contracts" 6.10
"Merger" Recitals
"Merger Consideration" 3.1
"Permitted Liens" 6.20
"Phase I" 8.19
"Problem" 8.7
"Proprietary Rights" 6.9.
10
Term Section
- ---- -------
"Purchaser" Preamble
"Purchaser's Closing Payment" 4.2.
"Representative" 13.4
"Representative Replacement Instrument" 13.4(b)
"Resort Holders" Preamble
"Resort Proceeds" 4.2
"Resort Shares" Recitals
"Sandpiper Expansion" 6.8
"Shareholder Consent" Preamble
"Special Shareholders Meeting" 8.4
"Subsidiaries" 6.1.
"Surviving Corporation" 2.1
"Transaction Fee Certificate" 4.2
"Transaction Fee Pay-Off Letters" 4.2
"Water Agreements" 6.8
"Water Rights" 6.8
ARTICLE II
THE MERGER
2.1 Surviving Corporation. Subject to the provisions of this Agreement
and the BCA, at the Effective Time, Purchaser shall be merged with and into the
Company, and the separate corporate existence of Purchaser shall cease. The
Company shall be the surviving corporation in the Merger (hereinafter sometimes
called the "Surviving Corporation") and shall continue its corporate existence
under the laws of the State of Florida. The Merger shall have the effects set
forth in Section 607.1106 of the BCA.
2.2 Articles of Incorporation. The Articles of Incorporation of
Purchaser shall be the Articles of Incorporation of the Surviving Corporation,
until thereafter duly amended in accordance with its terms and the BCA. The
corporate name of the Surviving Corporation shall be "Golf Hosts, Inc."
2.3 By-Laws. The By-Laws of Purchaser shall be the By-Laws of the
Surviving Corporation until thereafter duly amended in accordance with their
terms and the BCA.
2.4 Directors. The directors of the Surviving Corporation shall consist
of the directors of Purchaser immediately prior to the Effective Time, such
directors to hold office from the Effective Time until their respective
successors are duly elected and qualified.
11
2.5 Officers. The officers of the Surviving Corporation shall consist
of the officers of Purchaser immediately prior to the Effective Time, such
officers to hold office from the Effective Time until their respective
successors are duly elected and qualified.
2.6 Effective Time. When all the conditions set forth in Articles IX
and X shall have been fulfilled or waived in accordance with the terms hereof,
provided this Agreement shall not have been terminated in accordance with
Article XI hereof, the parties hereto shall cause the Articles and Plan of
Merger to be properly executed and filed with the Secretary of State of the
State of Florida no later than 12:00 noon (Tampa time) on the Closing Date, and
the Merger shall become effective upon filing on the Closing Date, and the date
and time when the Merger becomes effective is herein referred to as the
effective time (the "Effective Time"). Unless the context provides otherwise,
all references to the "Effective Time" shall refer to the earliest date and time
on which the Merger has become effective.
ARTICLE III
CONVERSION OF SHARES AND PURCHASE OF RESORT SHARES
3.1 Company Shares of Common Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of any holder thereof, each
Share issued and outstanding immediately prior to the Effective Time (except for
Dissenting Shares) shall be converted into the right to receive an amount equal
to the result obtained by dividing (x) the sum of (i) 80.2% of the sum of (1)
the Purchaser's Closing Payment less (2) all payments made pursuant to Section
4.2(c); plus (ii) the right to receive payments, if any, pursuant to the Escrow
Agreement (the "Aggregate Seller Proceeds") plus (ii) the right to receive
payments, if any, with respect to the Long-term Receivables as they are received
by the Company after the Closing by (y) the number of issued and outstanding
Shares immediately prior to the Effective Time (such amount shall sometimes be
referred to as the "Merger Consideration"). An example of the calculation of the
Merger Consideration is attached hereto as Exhibit H. The Company has determined
that it is in the best interests of its Shareholders to avoid the fees, expenses
and other costs of administration associated with providing the rights described
in the preceding clauses (ii) and (iii) as part of the Merger Consideration to
be received by Shareholders holding 10 or fewer Shares immediately prior to the
Effective Time. Consequently, in lieu of receiving the rights described in the
preceding clauses (ii) and (iii), (A) the Merger Consideration to be received by
each Shareholder holding 10 or fewer Shares immediately prior to the Effective
Time (a "De Minimis Shareholder") shall consist solely of cash (the "Cash
Consideration") in an amount equal to the product obtained by multiplying (I)
the number of Shares held by such De Minimis Shareholder by (II) the dollar
amount of "Merger Consideration per Share" set forth on Exhibit H, and (B)
except for the right to receive the Cash Consideration, each such De Minimis
Shareholder shall have no claim, right or interest in any further amounts
payable to Shareholders pursuant to this Agreement, the Escrow Agreement or the
Exchange Agent Agreement.
12
3.2 Dissenting Shares. To the extent that dissenters' rights are
available under 607.1301 et seq. of the BCA, Shares that are issued and
outstanding immediately prior to the Effective Time that have not been voted for
adoption of the Merger and with respect to which the holder of such Shares shall
have filed with the Surviving Corporation a notice of election to dissent and
demand for payment pursuant to 607.1320 of the BCA ("Dissenting Shares") shall
not be converted into the right to receive the Merger Consideration provided for
in Section 3.1 at or after the Effective Time unless such notice of election is
properly withdrawn by the dissenting Shareholder. If a holder of the Dissenting
Shares properly withdraws a notice of election to dissent and demand for
payment, such holder's Dissenting Shares shall cease to be Dissenting Shares and
shall be converted into and represent the right to receive the Merger
Consideration provided for in Section 3.1. If any holder of Shares shall assert
the right to be paid the fair value of such Shares as described above, the
Company shall give Purchaser prompt notice thereof and Purchaser shall have the
right to participate in all negotiations and proceedings with respect to any
such demands. The Company shall not, except with the prior written consent of
Purchaser, voluntarily make any payment with respect to, or settle or offer to
settle, any such demand for payment. Payment for the Dissenting Shares shall be
made as required by the BCA.
3.3 Exchange Agent. (a) Immediately prior to the Effective Time,
Purchaser shall deposit or shall cause to be deposited in trust with the
Exchange Agent cash in an amount equal to the Purchaser's Closing Payment
pursuant to Section 4.2(b). Such amount shall include the amount to which the
holders of Shares are entitled pursuant to Section 4.2(e)(i) (the "Closing
Seller Proceeds") and the Resort Proceeds (such Closing Seller Proceeds and
Resort Proceeds being hereinafter referred to as the "Exchange Fund"). Within
the time required by the Exchange Agent Agreement, the Exchange Agent shall
distribute the Closing Seller Proceeds and the Resort Proceeds as required by
the Exchange Agent Agreement.
(b) As soon as is reasonably practicable after the date hereof, but
prior to the Effective Time, the Exchange Agent shall make available to each
Shareholder of record (other than holders of Dissenting Shares) as of the
Effective Time a letter of transmittal in the form of Exhibit I hereto (a
"Letter of Transmittal") and instructions for use in effecting the surrender of
the certificate or certificates held by the Shareholders which immediately prior
to the Effective Time represented a Share or Shares (the "Certificate" or
"Certificates"). Payment shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper completion, execution and delivery of
the Certificates to the Exchange Agent, and the Letter of Transmittal shall so
reflect. Proper completion, execution and delivery of the Letters of
Transmittal, and their acceptance by the Exchange Agent and Purchaser, which
acceptance shall not be unreasonably withheld, shall be a condition precedent to
any payments pursuant to Section 3.1, in connection with the Merger. Upon
surrender to the Exchange Agent of a Certificate, together with a Letter of
Transmittal duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor a check representing the consideration to which
such holder shall have become entitled pursuant to Section 3.1 and the Exchange
Agent Agreement, and the Certificate so surrendered shall forthwith be
transferred to the Surviving Corporation. No interest will be
13
paid or accrued by Purchaser with respect to the cash payable upon the surrender
of the Certificates. From the Effective Time until surrender in accordance with
the provisions of this Section 3.3, each Certificate shall represent for all
purposes only the right to receive the consideration provided in Section 3.1.
All payments in respect of Shares that are made in accordance with the terms
hereof shall be deemed to have been made in full satisfaction of all rights
pertaining to such securities.
(c) In the case of any lost, mislaid, stolen or destroyed Certificate,
the holder thereof may be required, as a condition precedent to delivery to such
holder of the consideration described in Section 3.1, to deliver to the
Surviving Corporation a bond in such reasonable sum or a satisfactory indemnity
agreement as the Surviving Corporation may direct as indemnity against any claim
that may be made against the Exchange Agent or the Surviving Corporation with
respect to the Certificate alleged to have been lost, mislaid, stolen or
destroyed.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of the Shares that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for transfer, they shall
be exchanged for the consideration described in Section 3.1.
(e) Any portion of the Exchange Fund that remains unclaimed by the
Shareholders for one year after the Effective Time shall be returned to the
Surviving Corporation, upon demand, and any holder of Shares who has not
theretofore complied with Section 3.3(b) shall thereafter look only to the
Surviving Corporation for issuance of consideration to which such holder has
become entitled pursuant to the provisions of Section 3.1; provided, however,
that neither the Exchange Agent nor any party hereto shall be liable to a holder
of Shares for any amount required to be paid to a public official pursuant to
any applicable abandoned property, escheat or similar law.
3.4 Conversion of Purchaser Stock. As of the Effective Time, each share
of Common Stock, par value $0.01 per share, of Purchaser shall be converted into
one share of Common Stock, par value $0.30 per share, of the Surviving
Corporation so that all of the issued and outstanding capital stock of the
Surviving Corporation is owned by those Persons who are shareholders of
Purchaser prior to the Effective Time.
3.5 Purchase of the Resort Shares. Subject to the terms and conditions
of this Agreement, at the Closing, each Resort Holder shall sell, assign,
convey, transfer and deliver to Purchaser, and Purchaser shall purchase, acquire
and take assignment and delivery of, all of such Resort Holder's right, title
and interest in and to the Resort Shares owned by the Resort Holder, as set
forth on Schedule I hereto, free and clear of any Liens.
14
ARTICLE IV
CLOSING OF MERGER
4.1 Closing. The Closing of the Merger shall take place at the offices
of Mayer, Brown & Platt, 1675 Broadway, New York, New York at 10:00 A.M. on the
latest of:
(i) June 2, 1997,
(ii) three business days after the satisfaction or waiver of
the conditions precedent set forth in Articles IX and X, or
(iii) such other date, time and place as may be agreed by
Purchaser and the Company; provided, however, that the date of the
Closing shall be automatically extended from time to time for so long
as any of the conditions set forth in Articles IX and X shall not be
satisfied or waived, subject, however, to the provisions of Section
11.1. The date on which the Closing occurs in accordance with the
preceding sentence is referred to in this Agreement as the "Closing
Date."
4.2 Calculation of Purchaser's Closing Payment. (a) As consideration
for the Merger and the purchase of the Resort Shares, but subject to adjustment
pursuant to Section 4.3, Purchaser shall pay to the Exchange Agent an aggregate
amount equal to the difference of:
(i) Fifty-seven Million, Five Hundred Thousand Dollars
($57,500,000); less
(ii) the Deposit Amount, which shall be retained by the Escrow
Agent and transferred from the Deposit Escrow Account to the Escrow
Account; less
(iii) Four Million Five Hundred Thousand Dollars ($4,500,000)
(such amount together with the Deposit Amount, the "Escrow Amount")
which Escrow Amount shall remain in escrow pursuant to the Escrow
Agreement for a period of up to five years following the Closing Date;
less
(iv) all cost and expenses incurred in connection with
obtaining the Construction Loan; less
(v) the Final Tamarron Tax Liability; plus or minus, as the
case may be
(vi) Net Value as of the Closing Date; less
(vii) the unfunded commitments with respect to the Tamarron
Association of Condominium Owners, Inc. on the Closing Date; plus
15
(viii) any documented Sandpiper Expenditures.
(The difference of the result of the amounts referred to in clauses (i) through
(vii) above is referred to as the "Purchaser's Closing Payment.")
(b) At the Closing, Purchaser shall pay to the Exchange Agent an amount
in cash equal to the Purchaser's Closing Payment by wire transfer of immediately
available funds to an account or accounts designated by the Exchange Agent.
(c) At the Closing, the Exchange Agent, on behalf of the Company, for
Purchaser shall apply the Purchaser's Closing Payment, as follows:
(i) to pay all principal of, premium, if any, expenses and
other amounts owing to the holders of Indebtedness of the Company and
its Subsidiaries that is listed in the Closing Estimation under the
heading "Extinguished Debt," including all deferred financing and other
costs associated therewith (if any) and the current portion thereof
(the "Extinguished Debt"), as all such amounts are set forth in the
pay-off and discharge letters by such lenders and delivered to the
Company and Purchaser at the Closing (the "Lender Pay-Off Letters").
The amounts referred to in this clause (i) will be set forth in a
certificate of the Company's Chief Financial Officer and delivered to
Purchaser at the Closing (the "Extinguished Debt Certificate"); and
(ii) to pay transaction fees and expenses incurred or payable
by the Company or its Subsidiaries, the Resort Holders and the
Shareholders (to the extent such fees and expenses are not reflected in
Net Value and the Final Determination), including the costs of the
Survey, the opinion of water counsel and report of water engineer
delivered to Purchaser pursuant to Section 9.15(t) and the Engineering
Reports, in connection with this Agreement and the Related Agreements
and the transactions contemplated hereby and thereby in accordance with
this Agreement as such amounts are set forth in pay-off and discharge
letters ("Transaction Fee Pay-Off Letters") delivered at the Closing
and set forth in a certificate of the Company's Chief Financial Officer
and delivered to Purchaser at the Closing (the "Transaction Fee
Certificate"); provided that the obligation of the Company, the Resort
Holders and the Shareholders with respect to the Engineering Report
shall not exceed $27,100 and with respect to the opinion of water
counsel and report of water engineer shall not exceed $25,000 in the
aggregate;
(iii) to pay all interest on, if any, amounts owing to the
holders of the Extinguished Debt as such interest amount (a) is set
forth in the Lender Pay-Off Letters, and (b) is not paid or otherwise
satisfied by the Company at the Closing; and
(iv) to fund any set aside or to make any payments requested
in writing by the Representative pursuant to Section 13.4 and delivered
to the Exchange Agent at or prior to the Closing.
16
(d) At the Closing, (i) the Company will deliver to the Exchange Agent
a certificate setting forth the amount of the Purchaser's Closing Payment (and
its determination) and the amount of the Purchaser's Closing Payment per Share,
and (ii) the Exchange Agent will deliver to the Company, the Resort Holders and
all holders of Shares to be tendered pursuant to Section 3.3(b) a certificate
setting forth (x) the Purchaser's Closing Payment and its determination, and (y)
each of the amounts paid by the Exchange Agent pursuant to Section 4.2(c),
together with copies of the Lender Pay-Off Letters and the Transaction Fee
Pay-Off Letters, and (z) each of the amounts to be paid or applied by the
Exchange Agent pursuant to Section 4.2(e).
(e) At the Closing, the Exchange Agent shall apply the net Purchaser's
Closing Payment after paying or making arrangements, on behalf of the Company,
the Resort Holders and the Shareholders and the Purchaser, as applicable, for
paying the amounts set forth in Section 4.2(c) and deliver the net proceeds as
follows:
(i) an amount of cash equal to 80.2% of the net Purchaser's
Closing Payment to be distributed to the Shareholders by the Exchange
Agent pursuant to the terms of the Exchange Agent Agreement; and
(ii) the balance of the net Purchaser's Closing Payment (the
"Resort Proceeds") shall be paid to the Resort Holders. Each Resort
Holder will be entitled to an amount in cash equal to such Resort
Holder's share of the Resort Proceeds as set forth opposite such Resort
Holder's name on Schedule I hereto.
(f) In addition, each Resort Holder and Shareholder (other than a De
Minimis Shareholder) will be entitled to receive a quarterly payment from the
Exchange Agent equal to such Shareholder's or Resort Holder's proportionate
share of all amounts received by the Exchange Agent from the Surviving
Corporation during the quarter then ended as payment of the Long-term
Receivables less all out-of-pocket costs reasonably incurred by the Surviving
Corporation (if any) in collecting such payments. The Surviving Corporation
shall remit payments with respect to the Long-term Receivables to the Exchange
Agent within 20 business days from the end of each fiscal quarter and at any
time when the amount received by the Surviving Corporation with respect to the
Long-term Receivables shall equal $100,000 or more. The Resort Holders and
Shareholders each acknowledge that they have fully reviewed and are familiar
with the terms of the Long-term Receivables and the impact the transactions
contemplated by this Agreement and the Related Agreements may have on the
ability of the Company to collect such Long-term Receivables as contemplated by
this Agreement. The Resort Holders and Shareholders each further acknowledge
that the Surviving Corporation is collecting all amounts with respect to the
Long-term Receivables on behalf of the Shareholders (other than De Minimis
Shareholders) and the Resort Holders and has made no guaranty with respect to
the collection of the Long-term Receivables and has no obligation to collect
such Long-term Receivables other than to submit invoices with respect to the
collection thereof as contemplated by this Agreement.
17
(g) At the Closing, Purchaser shall deposit the Escrow Amount less the
Deposit Amount in the Escrow Account and the Escrow Agent will transfer the
Deposit Amount from the Deposit Escrow Account to the Escrow Account.
4.3 Determination of Purchaser's Closing Payment. (a) No later than 10
business days prior to the Closing Date, the Company will prepare and deliver to
Purchaser a detailed, reasonable, good faith estimation ("Closing Estimation")
of the Purchaser's Closing Payment, including Net Value as of the Closing Date,
the Extinguished Debt and the Long- term Receivables. Purchaser will provide to
the Company its objections to the Closing Estimation within five business days
after receipt by Purchaser of the Closing Estimation. The Company will discuss
any objections made by Purchaser to the Closing Estimation and shall make any
modifications thereto reasonably requested by Purchaser. Purchaser and the
Company will use all reasonable efforts to resolve such disputes no later than
two business days prior to the Closing Date. The Closing Estimation, as adjusted
by such modification and the resolution of such disputes, is herein referred to
as the "Purchaser's Closing Payment."
(b) Within 60 days after the Closing Date or as soon thereafter as
practicable, the Surviving Corporation will prepare and deliver to the
Representative a worksheet setting forth the Surviving Corporation's final
determination (the "Final Determination") of Purchaser's Closing Payment,
including Net Value as of the Closing Date and Long-term Receivables. The Final
Determination shall be determined in accordance with the methodology used in the
example calculation of Net Value set forth on Schedule II. The Representative
will deliver to the Surviving Corporation, within 15 days after receipt of the
Final Determination, a detailed statement describing any objections to the
Surviving Corporation's determination of the Final Determination. The Surviving
Corporation and the Representative will use reasonable efforts to resolve any
such disputes, but if a final resolution is not obtained within 15 days after
the Representative has submitted any objections, any remaining disputes will be
resolved by an accounting firm or other financial expert mutually agreeable to
the Surviving Corporation and the Representative. If the Surviving Corporation
and the Representative are unable to mutually agree on such an accounting firm
or expert, an independent "big six" accounting firm will be selected by lot
after eliminating one firm designated as objectionable by each of the Surviving
Corporation and the Representative. The Resort Holders and the Shareholders, on
the one hand, and the Surviving Corporation, on the other hand, shall each bear
one-half of the cost of such accounting firm or expert. The accounting firm so
selected will prepare a written report to both parties and will submit a
proposed resolution of such unresolved disputes. The Purchaser's Closing Payment
will be adjusted by the amount of the difference between the Closing Estimation
and the Final Determination, so that if the Closing Estimation exceeds the Final
Determination, the Escrow Agent will reimburse to the Surviving Corporation the
excess, and if the Closing Estimation is less than the Final Determination, the
Surviving Corporation will pay the Escrow Agent the shortfall, in either case in
immediately available Federal funds on the second business day following the
date when the Final Determination is so determined. Any amount payable by the
Escrow Agent pursuant to this Section 4.3 shall
18
be paid from the Escrow Account. Any amount payable by the Surviving Corporation
pursuant to this Section 4.3 to the Escrow Agent will be deposited in the Escrow
Account.
4.4 Delivery of Stock; Payment. At the Closing each Resort Holder shall
deliver to Purchaser one or more stock certificates representing the Resort
Shares set forth such Resort Holder's name on Schedule I hereto, duly endorsed
in blank for transfer or accompanied by duly executed stock powers in proper
form. At the Effective Time the Exchange Agent shall pay to the Resort Holders
the Resort Proceeds for the Resort Shares by check or wire transfer in next day
funds.
4.5 Accounts Receivable. On or after 180 days after the Closing Date,
the Surviving Corporation may assign to the Shareholders (other than the De
Minimis Shareholders) and Resort Holders any of the accounts receivable of the
Company and its Subsidiaries as of the Closing Date and which have not yet been
collected in the full amount thereof, provided that the Surviving Corporation
shall not have materially modified the terms of such accounts receivable, to the
extent that the total amount of such unpaid accounts shall exceed the amount of
the reserve for doubtful accounts determined in accordance with GAAP as set
forth in the Final Determination, and the Escrow Agent, on behalf of the
Shareholders (other than the De Minimis Shareholders) and Resort Holders shall
reimburse the Surviving Corporation within 5 days by wire transfer from the
Escrow Account, for the amount of such excess; provided, however, that the
Surviving Corporation shall use its best efforts to collect all such accounts
receivable. At the request of the Representative, the Surviving Corporation
shall continue to administer the collection of any accounts receivable assigned
to the Shareholders (other than the De Minimis Shareholders) and the Resort
Holders pursuant to this Section 4.5 and will continue to send invoices and
other collection materials consistent with the Company's past collection
practices to collect such accounts receivable. All amounts collected by the
Surviving Corporation with respect to the assigned accounts receivable pursuant
to this Section 4.5 shall be remitted to the Exchange Agent for distribution to
the Shareholders (other than the De Minimis Shareholders) and Resort Holders. A
list of the accounts receivable shall be prepared by the Company as of the
Closing Date to be delivered to Purchaser as soon as practicable after Closing.
In order to determine whether, or to what extent, an account receivable is
unpaid, the Surviving Corporation shall apply all amounts received from an
account debtor first to any account specifically identified by the debtor and if
none is designated, then to the debtor's oldest outstanding invoice or invoices.
Access to the Surviving Corporation's records to the extent necessary to verify
any amounts payable to the Surviving Corporation, shall be provided upon the
Representative's reasonable request. The reserve for doubtful accounts as
reflected on the Final Determination shall be used as the base for computations
pursuant to this Section 4.5.
4.6 Prorations. To the extent that any of the items listed below
relating to the business and operation of the Company and its Subsidiaries are
payable by the Surviving Corporation after the Closing Date but relate to
periods prior to the Closing Date and are not reflected in Net Value as of the
Closing Date, the Shareholders and the Resort Holders will
19
be liable to the extent such items relate to any time period up to and including
the Closing Date and to the extent that any of the items listed below relating
to the business and operation of the Company and its Subsidiaries are payable by
the Company prior to the Closing Date but relate to periods after the Closing
Date and are not reflected in Net Value as of the Closing Date, the Surviving
Corporation will be liable to the extent such items relate to any time period
after the Closing Date: (a) personal property, real estate, occupancy, income
and water taxes, if any, on or with respect to the business and operation of the
Business, or the assets or the obligations of the Company and its Subsidiaries;
(b) rents, taxes and other items payable by the Company or any of its
Subsidiaries under any lease, contract or other Contract; (c) the amount of any
license or registration fees with respect to any licenses or registrations which
are being assigned or transferred hereunder; (d) the amount of sewer rents and
charges for water, telephone, electricity and other utilities and fuel; (e) the
amount of any management fees; (f) the amount of all bonus payments to
employees; and (g) all other items which are normally prorated in connection
with similar transactions; provided that no proration shall be made to the
extent that such proration is accounted for in the Final Determination. The
Company, the Shareholders and the Purchaser agree that if any information is not
available as of the Closing Date to determine all adjustment and proration
calculations, such calculations will be made using the most recently available
information and when such information becomes available, the proration amount
shall be adjusted in connection with the Final Determination. To the extent that
any adjustment or proration is not reflected in the Final Determination, such
amount shall be paid by the Escrow Agent on behalf of the Shareholders (other
than the De Minimis Shareholders) and Resort Holders from the Escrow Account.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF EACH RESORT HOLDER
Each Resort Holder, severally as to such Resort Holder, hereby
represents and warrants to Purchaser that:
5.1 Title to Shares. The Resort Shares set forth opposite such Resort
Holder's name on Schedule I are owned, beneficially and of record by the Resort
Holders, free and clear of any and all Liens, and such Resort Holder has the
right to transfer to Purchaser, all of such Resort Shares. There are no options,
warrants, rights, convertible securities or other agreements or commitments
obligating such Resort Holder with respect to shares of capital stock of Resort
owned by such Resort Holder to transfer or sell, or cause the issuance, transfer
or sale of, any shares of capital stock of Resort. At the Closing, the Resort
Holder (or, if the Resort Holder is then deceased, his or her heirs,
administrator or personal representative) will transfer and convey, and
Purchaser will acquire, good, valid and marketable title to the Resort Shares
free and clear of all Liens.
20
5.2 Due Authorization. (a) The Resort Holder has duly and validly
executed and delivered this Agreement and has duly and validly executed and
delivered (or prior to or at the Closing will duly and validly execute and
deliver) the Related Agreements to which such Resort Holder is a party. This
Agreement constitutes the legal, valid and binding obligation of the Resort
Holder and the Related Agreements of the Resort Holder, upon execution and
delivery by the Resort Holder, will constitute legal, valid and binding
obligations of the Resort Holder, in each case, enforceable against the Resort
Holder in accordance with their respective terms.
(b) The Resort Holder has full power and authority to enter this
Agreement and the Related Agreements and to consummate the transactions
contemplated hereby and thereby, including the power to dispose of the Resort
Shares.
5.3 Consents and Approvals; Authority Relative to this Agreement. The
execution, delivery and performance by the Resort Holder of this Agreement and
the Related Agreements to which such Resort Holder is a party will not (a)
violate any law, regulation or order of any governmental Authority applicable to
the Resort Holder, (b) require any filing with or registration by the Resort
Holder with, or require any consent, permit, authorization or approval with
respect to the Resort Holder of, any Authority or other Person, or (c) with or
without the passage of time or the giving of notice or both, result in the
breach of, or constitute a default or require any consent under any Contract to
which the Resort Holder is a party or by which any of the Resort Holder's assets
or properties are bound, or result in the creation of any Lien upon any property
or assets of the Resort Holder pursuant to any instrument or agreement to which
the Resort Holder is a party or by which the Resort Holder or its properties are
bound, except in each case where any such filing, registration, consent or
approval, if not made or obtained, or any such violation, conflict, breach or
default, would not have a Material Adverse Effect on the Resort Holder or such
Resort Holder's ability to perform such Resort Holder's obligations under this
Agreement and the Related Agreements to which such Resort Holder is a party.
5.4 Broker's Fees. The Resort Holder has no liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement, and neither Purchaser, the
Surviving Corporation nor any Affiliate thereof shall have any liability or
otherwise suffer or incur any Loss as a result of or in connection with any
brokerage or finder's fee or other commission of any Person retained by the
Resort Holders in connection with any of the transactions contemplated by this
Agreement or the Related Agreements.
21
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser as follows
(unless the context indicates otherwise, all representations contained in this
Article VI with respect to the Company are made with respect to the Company and
its Subsidiaries, taken as a whole):
6.1 Due Incorporation; Capitalization. (a) The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Florida and each of the Company's direct and indirect subsidiaries is
listed on Schedule 6.1(a) hereto (the "Subsidiaries") and is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, with all requisite power and authority to own and operate its
assets and properties as they are now being owned and operated, and each state
of incorporation is listed on Schedule 6.1(a) hereto. The Company and each of
its Subsidiaries is duly qualified and in good standing as a foreign corporation
authorized to do business in each jurisdiction where the failure to be qualified
would, in the aggregate, have a Material Adverse Effect, and each such
jurisdiction is listed on Schedule 6.1(a). True, correct and complete copies of
the Articles of Incorporation and By-laws, as amended, of the Company and each
of its Subsidiaries have been delivered to Purchaser. Except as set forth on
Schedule 6.1(a) the Company owns all of the issued and outstanding capital stock
of each of the Subsidiaries.
(b) The authorized capital stock of the Company consists of 100,000
shares of Common Stock, $.30 par value per share, 51,562 of which are currently
issued and outstanding. All of the issued and outstanding shares of Common Stock
(i) are validly issued, fully paid and nonassessable, (ii) are, and when issued
were, free of preemptive rights, and (iii) are owned (legally and beneficially)
by the Shareholders, as set forth on Schedule 6.1(b) hereof. There are no shares
of capital stock of the Company held in the treasury of the Company and no
shares of capital stock of the Company are currently reserved for issuance for
any purpose or upon the occurrence of any event or condition. Except as set
forth on Schedule 6.1(b), there are no shares of capital stock or other
securities (whether or not such securities have voting rights) of the Company
issued or outstanding or any subscriptions, options, warrants, calls, rights,
convertible securities or other agreements or commitments of any character
obligating the Company to issue, transfer or sell, or cause the issuance,
transfer or sale of, any shares of capital stock or other securities (whether or
not such securities have voting rights) of the Company. There are no outstanding
contractual obligations of the Company which relate to the purchase, sale,
issuance, repurchase, redemption, acquisition, transfer, disposition, holding or
voting of any shares of capital stock or other securities of the Company or the
management or operation of the Company. Except for Shareholders' rights as
holders of the Shares or as disclosed elsewhere in this Agreement, no Person has
any right to participate in, or receive any payment based on any amount relating
to, the revenue, income, value or net worth of the Company or any component or
portion thereof, or any increase or decrease in any of the foregoing.
22
(c) The authorized capital stock of Resort consists of 5,000 shares of
common stock, $1.00 par value per share, all of which are currently issued and
outstanding, and 4,577,000 shares of preferred stock, $1.00 par value (the
"Preferred Stock"), all of which are currently issued and outstanding. All of
the issued and outstanding shares of common stock and Preferred Stock of Resort
(i) are validly issued, fully paid and nonassessable, (ii) are, and when issued
were, free of preemptive rights, and (iii) are owned (legally and beneficially)
by the Company or the Resort Holders. There are no shares of capital stock of
Resort held in the treasury of Resort and no shares of capital stock of Resort
are currently reserved for issuance for any purpose or upon the occurrence of
any event or condition. There are no shares of capital stock or other securities
(whether or not such securities have voting rights) of Resort issued or
outstanding or any subscriptions, options, warrants, calls, rights, convertible
securities or other agreements or commitments of any character obligating Resort
to issue, transfer or sell, or cause the issuance, transfer or sale of, any
shares of capital stock or other securities (whether or not such securities have
voting rights) of Resort. Except as set forth on Schedule 6.1(b) or as disclosed
elsewhere in this Agreement, there are no outstanding contractual obligations of
Resort which relate to the purchase, sale, issuance, repurchase, redemption,
acquisition, transfer, disposition, holding or voting of any shares of capital
stock or other securities of Resort or the management or operation of Resort.
Except for rights of the holders of the Common Stock or Preferred Stock of
Resort as holders of the Common Stock or Preferred Stock, no Person has any
right to participate in, or receive any payment based on any amount relating to,
the revenue, income, value or net worth of Resort or any component or portion
thereof, or any increase or decrease in any of the foregoing.
(d) Except as set forth on Schedule 6.1(d), since January 1, 1997, no
dividend or other distribution of any nature (whether in cash, stock or
property, or any combination thereof) has been declared, made, set aside or paid
on or in respect of any of the capital stock of the Company or any of its
Subsidiaries, and neither the Company nor any of its Subsidiaries has directly
or indirectly, issued, redeemed, retired, purchased or otherwise acquired any of
its capital stock.
(e) The Company has full corporate power and authority to execute and
deliver this Agreement and, subject only to the approval of this Agreement by
the holders of a majority of the Shares, to perform its respective obligations
under this Agreement, the Related Agreements and to consummate the Merger and
the other transactions contemplated hereby. The execution and delivery of this
Agreement and the Related Agreements by the Company and the performance by the
Company of its obligations hereunder and the consummation of the Merger and the
other transactions provided for herein have been duly and validly authorized by
all necessary corporate action on the part of the Company. The Board of
Directors of the Company has reviewed a form of this Agreement and has
authorized and approved the execution, delivery and performance of this
Agreement and the consummation of the Merger and the other transactions
contemplated hereby, and has recommended to the Shareholders that they vote to
approve the Merger and the other transactions contemplated by this Agreement.
The Company has delivered to Purchaser, on the date hereof, resolutions of the
Board of Directors of the Company evidencing the due authorization of this
Agreement
23
and the Merger certified by the secretary of the Company. This Agreement has
been duly executed and delivered by the Company and constitutes the valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, insolvency and other similar
laws affecting the enforceability of creditors' rights generally, general
equitable principles and the discretion of courts in granting equitable
remedies.
6.2 Financial Statements. (a) The Financial Statements have been
prepared in accordance with GAAP, present fairly the consolidated financial
position of the Company and the Subsidiaries as of the dates thereof and the
results of operations and cash flows of the Company and the Subsidiaries for the
periods covered thereby, are correct and complete in all material respects, and
are consistent with the books and records of the Company and the Subsidiaries
(which books and records are correct and complete in all material respects),
except that interim financial statements omit footnotes and are subject to
customary year-end adjustments and accruals, that will not individually or in
the aggregate, have a Material Adverse Effect.
(b) Except as set forth on Schedule 6.2(e) or in the Financial
Statements, the Company has no material liabilities, debts, claims or
obligations of any nature on the date of this Agreement, whether accrued,
absolute, direct or indirect, contingent or otherwise, whether due or to become
due (the "Liabilities") except Liabilities incurred in the ordinary and usual
course of business and consistent with past practice since December 31, 1996
(none of which relates to any breach of contract, breach of warranty, tort,
infringement, or violation of law or arose out of any charge, complaint, action,
suit, claim, proceeding or demand).
(c) The reserves and accruals set forth in the Financial Statements are
sufficient to pay all Taxes that have become due and payable during, or which
have accrued with respect to the Company for, any period and that have not been
paid prior to the Closing Date or reserved on the Financial Statements (which
reserves shall not take into account any liability for deferred taxes).
(d) All accounts receivable of the Company have arisen out of bona fide
transactions in the ordinary course of business, and each such accounts
receivable, other than routine good faith accrual estimates that will be
adjusted and reflected in the Final Determination, constitutes a valid and
binding obligation of the obligor, maker, comaker, guarantor, endorser or debtor
thereof or thereunder.
(e) Except as set forth in the Closing Estimation under the heading
"Remaining Debt" and for Indebtedness incurred by Purchaser in connection with
the transactions contemplated by this Agreement, the Company will not be subject
to any Indebtedness for borrowed money, as of the Closing, and after giving
effect to the transactions contemplated by this Agreement.
24
6.3 Reports. The Company has furnished to Purchaser copies of all
forms, reports, statements (including without limitation any financial
statements and schedules) and documents of Resort filed with the SEC (the "SEC
Documents"), all of which have complied in all respects with all applicable
requirements of the Securities Act and the Exchange Act, as applicable, and the
laws, regulations and rules relating thereto, except where the failure to comply
with such requirements, laws, regulations and rules would not have a Material
Adverse Effect on the Company or Resorts. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and none of the SEC
Documents, at the time of their filing, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading. Resort has timely filed
all registration statements, reports and other filings required to be filed with
the SEC under its rules and regulations except where the failure to file would
not have a Material Adverse Effect.
6.4 Right of First Refusal. The Company and/or Resorts has complied in
all respects with, and as of the Closing will have received all waivers,
consents, and/or approvals required under, the Management Agreements dated as of
March 25, 1993 and November 20, 1995, between Hilton and Resorts (the
"Management Agreements") with respect to this transaction, including Section
9.04 thereof. As of the date hereof and at all times thereafter, Hilton has and
will have no right to acquire the Company, any of its Subsidiaries or any of the
assets of the Company or its Subsidiaries as a result of any agreement, Contract
or understanding with the Company, any of its Subsidiaries, any Shareholder or
any Resort Holder in effect as of the date hereof or the Closing Date.
6.5 Subsidiaries. Except as set forth on Schedule 6.1(a), neither the
Company nor any of its Subsidiaries own any capital stock or other equity
securities of any other corporation or has any other type of interest (whether
ownership or other) in any other corporation, partnership, joint venture or
other business organization or entity. Except as set forth on Schedule 6.5,
neither the Company nor any of its Subsidiaries is subject to any obligation or
requirement to provide funds for, or to make any investment (in the form of a
loan, capital contribution or otherwise) to or in, any Person. Except as set
forth on Schedule 6.1(b), there are no subscriptions, options, warrants, calls,
rights, convertible securities or other agreements or commitments of any
character obligating the Company or any of its Subsidiaries to issue, sell,
transfer, redeem or purchase any shares of the outstanding capital stock of any
Subsidiary.
6.6 No Violation; Consents and Approvals. Subject only to (i) the
approval of this Agreement by the holders of a majority of the outstanding
Shares and (ii) the filing and recordation of the Articles and Plan of Merger as
required by the BCA, and except for the consents set forth on Schedule 6.6 all
of which will be obtained prior to the Closing Date (other than the liquor
licenses), the execution, delivery and performance of this Agreement, the
Related Agreements, the consummation of the Merger and the other transactions
25
contemplated by this Agreement and the Related Agreements and the fulfillment of
and compliance with the terms and conditions of this Agreement and the Related
Agreements do not and will not, with the passing of time or the giving of notice
or both:
(a) violate or conflict with, constitute a breach of or
default under, result in the loss of any material benefit under, or
permit the termination or acceleration of any obligation under, (i) any
term or provision of the Articles of Incorporation or By-Laws of the
Company or any of its Subsidiaries, (ii) any judgment, decree or order
of any Authority to which the Company is a party or by which the
Company, or any of its properties is bound, (iii) any statute, law,
regulation or rule applicable to the Company, or (iv) any debt,
contractual or other obligation of the Company or its Subsidiaries and
which will cause in the case of subsection (ii), (iii) or (iv) above, a
Material Adverse Effect;
(b) require the consent of any party to any agreement or
commitment to which the Company or its Subsidiaries are a party, or by
which the Company or its Subsidiaries is bound, the failure of which to
obtain would, individually or in the aggregate with all other failures
to obtain required consents, have a Material Adverse Effect, or result
in the creation or imposition of any security interest, Lien, or other
encumbrance upon any property or assets of the Company or its
Subsidiaries (determined singly or in the aggregate), under any
agreement or commitment to which the Company or its Subsidiaries is a
party, or by which the Company or its Subsidiaries is bound;
(c) require the consent, approval or authorization of, or
declaration, filing or registration with, any Authority or other third
party, other than consents, approvals or authorizations which if not
received, or declarations, filings or registrations which if not made,
in any single case or in the aggregate, would not have a Material
Adverse Effect or impede the consummation of the transaction
contemplated by this Agreement or any Related Agreement.
6.7 Preservation of Business. Except as set forth on Schedule 6.7,
since December 31, 1996 (i) each of the Company and its Subsidiaries has been
operated in the ordinary and usual course of its business and consistent with
past practice; (ii) the business organization and personnel of the Company and
each of its Subsidiaries has been maintained intact, except for personnel
changes occurring in the ordinary course of business; and (iii) the business
relationships of each of the Company and its Subsidiaries with other Persons
have been preserved except where the failure to preserve such relationship could
not have a Material Adverse Effect. Without limiting the generality of the
foregoing, except as set forth in Schedule 6.7, since December 31, 1996, the
Company and each of its Subsidiaries has not, except as consented to in writing
by Purchaser, taken any action listed in Section 8.2
6.8 Real Property. (a) Schedule 6.8(a) lists and describes briefly all
Real Property that the Company owns and subject to Permitted Liens is complete,
true and correct in all
26
material respects. Except for Permitted Liens with respect to each such parcel
of owned Real Property:
(i) the Company or its Subsidiaries has good and marketable
title to the parcel of Real Property (or, in the case of the Easement,
good and marketable easement rights), free and clear of any Lien,
easement, covenant, or other restriction, except for (A) installments
of taxes or special assessments not yet delinquent and (B) recorded
easements, covenants, and other restrictions of record or which do not
materially impair the current use, occupancy, or value, or the
marketability of title, of the property subject thereto;
(ii) there are no (A) pending or, to the Knowledge of the
Company, threatened condemnation proceedings relating to the Real
Property, or (B) pending or, to the Knowledge of the Company,
threatened litigation or administrative actions relating to the Real
Property;
(iii) the Company has received no notice that any of the
facilities has not received all approvals of Authorities (including
licenses and permits) required in connection with the ownership or
operation thereof or that the facilities have not been operated and
maintained in accordance with applicable laws, rules, and regulations;
(iv) except as set forth on Schedule 6.8(a)(iv) and
specifically excluding any sales contracts entered into with resort
customers at the Tamarron Property or the Innisbrook Property in the
ordinary course of business consistent with past practices (none of
which sales contracts grant any one customer the right to use any
portion of the Real Property for more than thirty (30) consecutive
days) and other than paid members entitled to use the facilities and
dining areas and the Tamarron Property and the Innisbrook Property,
there are no leases, subleases, licenses, concessions, or other
agreements, written or oral, granting to any party or parties the right
of use or occupancy of any portion of the parcel of Real Property and
there are no other parties in possession of the parcel of Real
Property;
(v) there are no outstanding options or rights of first
refusal to purchase the parcel of Real Property, or any portion thereof
or interest therein for which waivers have not been obtained;
(vi) all facilities located on the parcel of Real Property are
supplied with utilities and other services necessary for the current
operation of such facilities, including gas, electricity, water,
telephone, sanitary sewer, and storm sewer, all of which services (A)
to the Knowledge of the Company, are adequate for the current use in
accordance with all applicable laws, ordinances, rules, and
regulations, (B) enter through adjoining streets or land and (C) to the
Knowledge of the Company, are in good working order and repair;
27
(vii) to the Knowledge of the Company, there are no material,
latent or patent physical defects or deficiencies (structural or
otherwise) with respect thereto, any item of deferred maintenance or
any code or other legal violation inclusive of compliance with the
requirements of the Americans with Disabilities Act of 1990, as
amended, and the regulations promulgated thereunder;
(viii) except as set forth on Schedule 6.8(a)(viii), there is
no consent of any governmental authority, the Innisbrook Condominium
Association, Inc., the Tamarron Association of Condominium Owners, Inc.
or any other third party that is required for the transaction
contemplated by this Agreement;
(ix) the Company has enforced all available rights and has
protected and preserved its interest in all rights, agreements and
matters relating to the Innisbrook Condominium Association, Inc. and
the Tamarron Association of Condominium Owners, Inc.;
(x) the Company has no Knowledge, nor has it received notice
within the past three years, of any existing violation of any provision
of any applicable building, zoning, subdivision, environmental or other
governmental ordinance, resolution, statute, rule, order or regulation,
including but not limited to those environmental agencies or insurance
boards of underwriters, with respect to the ownership, operation, use,
maintenance or condition of the Real Property or any part thereof, or
requiring any repairs or alterations other than those that have been
made prior to the date hereof;
(xi) to the Company's Knowledge, (A) the improvements on the
Real Property conform in all material respects to all legal
requirements, (B) all contractors and subcontractors retained by the
Company who have performed work on or supplied materials to the Real
Property have been fully paid, and all materials used at or on the Real
Property have been fully paid for (or have been fully reserved for as
reflected in the Financial Statements and the Final Determination), (C)
the improvements on the Real Property have been completed in all
material respects in a workmanlike manner, and (D) all material
equipment necessary or appropriate for the use or operation of the Real
Property has been installed and is presently operative in good working
order. The Company has not received any written notice which is still
in effect that there is, and, to the Company's Knowledge, there does
not exist, any violation of a condition or agreement contained in any
easement, restrictive covenant or any similar instrument or agreement
existing the Real Property, or any portion thereof;
(xii) the Company has not expressly released or modified any
warrants or guarantees, if any, of manufacturers, suppliers and
installers relating to improvements on the Real Property or any party
thereof;
28
(xiii) except as set forth on Schedule 6.8(a)(xvii), and to
the Company's Knowledge, no fact or condition exists which would result
in the termination or material impairment of access to the Real
Property from adjoining public or private streets or ways or which
would result in discontinuation of presently available or otherwise
necessary sewer, water, electric, gas, telephone or other utilities or
services;
(xiv) the Company has or will have as of the Closing Date all
necessary certificates of occupancy or completion (evidence of which is
attached hereto or otherwise described on Schedule 6.8(a)(xiv) or will
be provided to Purchaser prior to the Closing Date) to operate the Real
Property as presently operated and, to the Knowledge of the Company,
there are no material conditions that the Company has failed or refused
to fulfill respective of the development of the Real Property;
(xv) the Company does not know of any defects, facts or
conditions materially and adversely affecting the Real Property that
make it unsuitable for the use in the Business as presently conducted;
(xvi) listed on Schedule 6.8(a)(xvi) is (A) a complete listing
of each contract or other agreement wherein the Company has agreed to
supply water to various third parties or pursuant to which the Company
has other rights or obligations primarily relating to water (the "Water
Agreements") and (B) a complete listing of all of the Company's rights,
title and interest in and to any and all lakes, rivers, streams or
other bodies of water (the "Water Rights"), which listing accurately
sets forth the name of the body of water, the decreed amount, the
decreed source and use, the appropriation and adjudication date and the
applicable case number relating to such decree. To the Knowledge of the
Company, there are no liens, encumbrances or other matters affecting
the Company's rights and title to the Water Rights other than as set
forth on Schedule 6.8(a)(xvi). Notwithstanding any such lien or
encumbrance, the Water Rights have in the past been legally and
physically sufficient to satisfy all of the Company's obligations under
the Water Agreements (or the Company is not liable for failing to
satisfy its obligations under the Water Agreements) and to meet the
water requirements necessary to own and operate the Real Property as a
resort golf course. The cost for such Water Rights are set forth on
Schedule 6.8(a)(xvi). The Company has obtained all permits, licenses
and other requirements necessary to operate any water and wastewater
facilities on the Real Property and the Company has not received any
notices of violation with respect to its use of any water and
wastewater facility on the Real Property;
(xvii) (A) except as set forth on Schedule 6.8(a)(xvii), and
to the Knowledge of the Company, there are no plans, studies or efforts
by any governmental authority to widen, modify or realign any street
that would be adverse to the Real Property, (B) there are no intended
public improvements or special assessments affecting the Real Property
that will result in any charge being levied or assessed against the
Real
29
Property or in the creation of any lien against the Real Property, and
(C) there are no commitments with any governmental authority affecting
the Real Property, other than as provided in Section 6.8(d); and
(xviii) to the Company's Knowledge, the Company has obtained
all required licenses, permits and approvals for the past and current
development and sale of single family lots, condominium units and other
completed development activities described on Schedule 6.8(a)(xviii)
with respect to the Real Property described on Schedule 6.8(a)(xviii)
and (A) with respect to the Estates at Tamarron, Pine Ridge, the
Company has sold two (2) single family lots and owns in fee simple
seven (7) unsold single family lots, (B) the Innisbrook Property
contains a 73 acre (more or less) and a 30 acre (more or less) parcel
of land which may be developed into approximately 585 condominium units
or single family lots, with related commercial development uses and (c)
the Tamarron Property contains 347 acre (more or less) parcel of land
which may be developed into approximately 481 condominium units or
single family lots. Certain constraints to further development at
Innisbrook and Tamarron are reflected on Schedule 6.8(a)(xviii).
(b) The Company is not a party to any lease or sublease of any portion
of the Real Property except as described in Schedule 6.8(b). The leases and
subleases described in Schedule 6.8(b) (the "Leases") constitute all of the
leases and subleases under which the Company or any of the Subsidiaries holds
any leasehold or subleasehold interest in the Real Property. Each of the leases
is in full force and effect and the Company or any of the Subsidiaries holds a
valid and existing leasehold or subleasehold interest thereunder in the Real
Property which is subject thereto (collectively the "Leased Real Properties").
The Company has delivered to Purchaser complete and accurate copies of
each of the Leases, in each case including all modifications and amendments
thereto. With respect to each Lease: (i) such Lease is legal, valid, binding,
enforceable and in full force and effect; (ii) such Lease will continue to be
legal, valid, binding, enforceable and in full force and effect on identical
terms immediately after the Closing; (iii) neither the Company nor any of the
Subsidiaries is in breach or default under, and to the Knowledge of the Company
no event has occurred which, with notice or lapse of time, or both, would
constitute such a breach or default or permit termination, modification or
acceleration of, such Lease; (iv) to the Knowledge of the Company, no other
party to such Lease is in breach or default under, and no event has occurred
which, with notice or lapse of time, or both, would constitute such a breach or
default or permit termination, modification or acceleration of, such Lease; (v)
no party to such Lease has repudiated any provision thereof; (vi) there are no
disputes, oral agreements, or forbearances in effect as to such Lease; (vii)
such Lease has not been modified in any respect, except to the extent that such
modifications are disclosed by the documents delivered to Purchaser; (viii)
neither the Company nor any of the Subsidiaries has assigned, transferred,
conveyed, mortgaged, deeded in trust or caused any lien to exist with respect to
any interest in such Lease; (ix) neither the Company nor any of the Subsidiaries
has contracted for the furnishing of labor or materials to any of the Leased
Real Properties
30
(A) which will not be paid in full (or have been fully reserved for as reflected
in the Financial Statements and the Final Determination) at or prior to the
Closing Date, or (B) which would give rise to a claim of lien which will not be
discharged by the Company or any of the Subsidiaries prior to Closing; (x) gas,
water, sewage facilities, electricity and telephone lines are supplied to the
Leased Real Properties by either private or public authorities; and (xi) neither
the Company nor any of the Subsidiaries has any Knowledge of any latent defect
to any of the Leased Real Properties which would have or is likely to have a
material adverse affect on the use of the Leased Real Property as currently
used.
(c) With respect to the master lease agreements entered into by the
Company and the individual condominium unit owners at each of the Tamarron
Property and the Innisbrook Property last amended September 15, 1994 and July
17, 1995, respectively (the obligations of which shall continue to be binding
after the transactions contemplated hereby), the Company represents and warrants
that, as of March 31, 1997, 299 condominium rental units at the Tamarron
Property (none of which are owned by the Company and constitute part of the
Tamarron Property) and 972 condominium rental units at the Innisbrook Property
(5 of which are owned by the Company and constitute part of the Innisbrook
Property) are currently participating in the rental pool described in such
master lease agreements.
(d) The Company has entered into that certain Agreement for Effluent
Disposal, dated April 30, 1973, between the Company and Pinellas County, as
amended by that certain First Amendment to Agreement for Effluent Disposal (the
"First Amendment") dated as of January 28, 1997, between Pinellas County and the
Company (collectively the "Effluent Agreement"), which Effluent Agreement
provides that, inter alia, (i) the Company shall be obligated to receive up to
five million (5,000,000) gallons per day of effluent and (ii) the Company shall
have an exclusive easement (the "Easement") on certain land described therein
for the purpose of constructing, operating and maintaining a nine-hole golf
course (the "Sandpiper Expansion"). The Company hereby represents, covenants and
warrants that (i) the real property commonly known as the Innisbrook Hilton
Resort, as legally described in the Effluent Agreement, can adequately meet the
daily effluent delivery requirement set forth in the Effluent Agreement so as
not to be in violation of any term or condition thereof, (ii) on or before the
Closing Date, the Company will have obtained all necessary licenses, permits and
approvals to fulfill its obligations under the Effluent Agreement, including,
without limitation, those licenses, permits and approvals required to design and
construct the Sandpiper Expansion, (iii) on or before the Closing Date the
Company will have satisfied or waived the contingencies set forth in the
Effluent Agreement (without which the First Amendment is null and void), has
obtained written approval from Hilton of the First Amendment and that certain
Easements and Development Agreement, dated as of February 11, 1997, between the
Company and Wall Springs Conservatory, Inc. (the "Development Agreement"), (iv)
all effluent received under the Effluent Agreement shall be received by the
Company at no cost to the Company and (v) the only basis for the termination of
the Easement is the abandonment by the Company of the Easement as described in
the First Amendment.
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6.9 Intellectual Property Rights. The Company owns, or possesses
adequate licenses or other rights to use, any and all computer software,
software programs, patents, patent applications, trademarks, trademark
applications, trade secrets, formulations, service marks, trade names,
copyrights, inventions, invention disclosures, drawings, designs, customer
lists, proprietary know-how or information or other rights with respect thereto
(collectively referred to as "Proprietary Rights"), used in or required for the
Business as currently conducted, except those Proprietary Rights the failure to
possess would not have a Material Adverse Effect. Schedule 6.9 sets forth a true
and complete list as of the date hereof of all such Proprietary Rights,
including, where applicable, registration numbers and jurisdictions where such
registrations exist. The Company has not received notice of any claims,
disputes, actions, proceedings, suits or appeals pending against the Company or
its Subsidiaries with respect to any Proprietary Rights that if adversely
determined could reasonably be expected to result in a loss of any Proprietary
Rights or any other loss that could reasonably be expected to have a Material
Adverse Effect, and, to the Knowledge of the Company, none has been threatened.
To the Knowledge of the Company, none of the Proprietary Rights infringes on the
proprietary rights of any third party, no product (or component thereof) or
process used, sold or manufactured by and/or for, or supplied to, the Company or
its Subsidiaries, infringes or otherwise violates the proprietary rights of any
other Person.
6.10 Contracts. Schedule 6.10 contains an accurate list as of the date
of this Agreement of all the Contracts of the following types to which the
Company or any of its Subsidiaries is a party or to which any of its assets or
properties is subject (the "Material Contracts"): (a) any collective bargaining
Contract; (b) any pension, retirement, deferred compensation, profit sharing,
incentive compensation, bonus, stock purchase, stock option, welfare,
hospitalization or insurance plan or arrangement or any vacation pay or
severance pay or any other employee benefit arrangement for its officers,
employees, consultants or agents whether pursuant to a Contract or pursuant to
custom or informal understanding, other than plans or arrangements listed on
Schedule 6.12; (c) all Contracts of any kind with any officer, director, or
shareholder, relating to present or future compensation or other benefits
available to such person or otherwise, other than plans or arrangements listed
on Schedule 6.12; (d) any contract, purchase order or other arrangement of any
kind (other than arrangements relating to employment and plans and arrangements
listed on Schedule 6.12) with any Person Affiliated with or controlled by (or
with power to control) the Company or any officer, director, salaried employee;
(e) any Contract with a broker, sales agency, advertising agency or other person
engaged in sales, distributing or promotional activities entered into other than
in the ordinary course of business consistent with past practices which involve
an unperformed commitment in excess of $15,000; (f) any Contract, purchase order
or other arrangement of any nature (other than a sales Contract or order) which
involves an unperformed commitment in excess of $25,000; (g) any commitment or
arrangement pursuant to which the Company or any of its Subsidiaries has made or
will make loans or advances, or has or will have incurred debts or become a
guarantor or surety or pledged its credit on or otherwise become responsible
with respect to any undertaking of another (except for the negotiation or
collection of negotiable instruments in transactions in the ordinary
32
course of business); (h) any indentures, credit agreements, loan agreements,
notes, mortgages, security agreements, and agreements for financing; (i) all
leases of Real Property or leases of personal property; (j) any Contract
involving a partnership, joint venture or other cooperative undertaking, or
involving any restrictions of the geographical area of operations or scope or
type of business of the Company or any of its Subsidiaries; (k) all Contracts
with sales representatives, distributors and dealers entered into other than in
the ordinary course of business consistent with past practices; (l) any power of
attorney or agency agreement or arrangement with any party pursuant to which
such party is granted the authority to act for or on behalf of the Company or
any of its Subsidiaries; (m) any property, casualty and other forms of
insurance; (n) Contracts that are not terminable without liability within 60
days from the date of this Agreement; (o) any Contract or arrangement of any
nature between the Company or any of its Subsidiaries and Hilton, the Innisbrook
Condominium Association, Inc., or the Tamarron Association of Condominium
Owners, Inc.; or (p) all other Contracts, including sales orders, not made in
the ordinary course of business consistent with past practice which are to be
performed at or after the date of this Agreement. The Company has made available
to Purchaser true and complete copies of each Material Contract.
Each of the Material Contracts is in full force and effect and
enforceable in accordance with its terms; the Company has not received any
notice (written or oral) of cancellation or termination of, or any expression or
indication of an intention or desire to cancel or terminate, any of the Material
Contracts and the Company reasonably believes that no such Material Contract
will be terminated due to the transactions contemplated by this Agreement or the
Related Agreements; other than the Management Agreements (Section 9.05), no
Material Contract contains a change of control or ownership provision which
would be applicable to the transactions contemplated by this Agreement or the
Related Agreements; no Material Contract is the subject of, or, to the Knowledge
of the Company, has been threatened to be made the subject of, any arbitration,
suit or other legal proceeding; with respect to any Material Contract which by
its terms will terminate as of a certain date unless renewed or unless an option
to extend such Material Contract is exercised, the Company has not received any
notice (written or oral), or otherwise has any Knowledge, that any such Material
Contract will not be so renewed or that any such extension option will not be
exercised; no Material Contract contains a provision that would prohibit the
Surviving Corporation from incurring Indebtedness at the Closing Date; and there
exists no event of de fault or occurrence, condition or act on the part of the
Company or, to the Knowledge of the Company, on the part of the other parties to
the Material Contracts which constitutes or would constitute (with notice or
lapse of time or both) a breach of or default under any of the Material
Contracts, except to the extent that the inaccuracy of the foregoing would not,
indi vidually or in the aggregate, have a Material Adverse Effect.
6.11 Insurance. Schedule 6.11 contains a list of all policies of fire
and casualty, liability, workmen's compensation and other forms of insurance,
including the coverage amounts, deductibles and risks and losses against which
such policies provide coverage, maintained by the Company and its Subsidiaries
with respect to their assets and business. Except as set forth in item (ii) (re
Howell suit) on Schedule 6.17, the Company and its
33
Subsidiaries do not have any liability or contingent liabilities with respect to
such coverages beyond the limits of such policies. All such policies are in full
force and effect, all premiums due and payable thereon have been paid (other
than retroactive or retrospective premium adjustments that are not yet, but may
be, required to be paid with respect to any period ending prior to the Closing
Date under comprehensive general liability and workmen compensation insurance
policies which amounts will be paid or accrued prior to the Closing Date), no
notice of cancellation or termination has been received with respect to any such
policy which has not been replaced on substantially similar terms prior to the
date of such cancellation and such policies will continue in full force and
effect after the consummation of the transactions contemplated by this Agreement
and the Related Agreements. The Company has not received any notice from any
insurance company of any defect or inadequacies in the property used in
connection with the Business or any part thereof which would adversely affect
the insurability of the property used in connection with the Business, or which
would increase the cost of insurance beyond that which would ordinarily and
customarily be charged for similar properties in the vicinity of the Company's
facilities.
6.12 Benefit Plans.
(a) General. Except as set forth on Schedule 6.12, neither the Company
nor any of its Subsidiaries has any liability or contingent liability with
respect to:
(i) any "employee welfare benefit plan" (as that term is
defined in section 3(1) of ERISA);
(ii) any "employee pension benefit plan" (as that term is
defined in section 3(2) of ERISA) or "multiemployer plan" (as that term
is defined in section 3(37) of ERISA);
(iii) any retirement or deferred compensation plan, incentive
compensation plan, stock plan, unemployment compensation plan, vacation
pay, severance pay, bonus or benefit arrangement, insurance or
hospitalization program or any other fringe benefit arrangements for
any current or former employee, director, consultant or agent, whether
pursuant to contract, arrangement, custom or informal understanding,
which does not constitute an employee benefit plan (as defined in
section 3(3) of ERISA); or
(iv) any employment agreement.
(b) Plan Documents and Reports. A true and correct copy of each of the
plans, arrangements, and agreements listed on Schedule 6.12 (referred to
hereinafter as "Benefit Plans"), and all contracts relating thereto, or to the
funding thereof, including, without limitation, all trust agreements, insurance
contracts, administration contracts, investment management agreements,
subscription and participation agreements, and recordkeeping agreements, each as
in effect on the date hereof, has been supplied to Purchaser. In the case
34
of any Benefit Plan that is not in written form, Purchaser has been supplied
with an accurate description of such Benefit Plan as in effect on the date
hereof. A true and correct copy of the most recent annual report, actuarial
report, accountant's opinion of the plan's financial statements, summary plan
description and Internal Revenue Service ruling or determination letter with
respect to each Benefit Plan, to the extent applicable, and a current schedule
of assets (and the fair market value thereof assuming liquidation of any asset
which is not readily tradable) held with respect to any funded Benefit Plan has
been supplied to Purchaser, and there have been no material changes in the
financial condition in the respective plans from that stated in the annual
reports and actuarial reports supplied.
(c) Compliance with Laws; Liabilities. As to all Benefit Plans:
(i) None of the Benefit Plans is subject to section 412 of the
Code or Title IV of ERISA.
(ii) All Benefit Plans comply and have been administered in
form and in operation in all material respects with all applicable
requirements of law, and no event has occurred that will or could cause
any such Benefit Plan to fail to comply with such requirements and no
notice has been issued by any governmental authority questioning or
challenging such compliance.
(iii) None of the assets of any Benefit Plan is invested in
employer securities or employer Real Property.
(iv) There have been no "prohibited transactions" (as
described in section 406 of ERISA or section 4975 of the Code) with
respect to any Benefit Plan.
(v) There have been no acts or omissions by the Company or its
Subsidiaries that have given rise to or may give rise to fines,
penalties, taxes or related charges under section 502 of ERISA or
Chapters 43, 47 or 68 of the Code for which the Company or its
Subsidiaries may be liable.
(vi) None of the payments contemplated by the Benefit Plans
would, in the aggregate, constitute excess parachute payments (as
defined in section 280G of the Code (without regard to subsection
(b)(4) thereof)).
(vii) There are no actions, suits or claims (other than
routine claims for benefits) pending or threatened involving any
Benefit Plan or the assets thereof and no facts exist which could give
rise to any such actions, suits or claims (other than routine claims
for benefits).
(viii) Each Benefit Plan that constitutes a "group health
plan" (as defined in section 607(1) of ERISA or section 4980B(g)(2) of
the Code), including any plans of current and former affiliates which
must be taken into account under sections 4980B
35
and 414(t) of the Code or section 601 of ERISA, has been operated in
compliance with applicable law, including coverage requirements of
section 4980B of the Code and section 601 of ERISA to the extent such
requirements are applicable.
(ix) Neither the Company nor any of its Subsidiaries has any
liability or contingent liability for providing, under any Benefit Plan
or otherwise, any post-retirement medical or life insurance benefits,
other than statutory liability for providing group health plan
continuation coverage under Part 6 of Title I of ERISA and section
4980B of the Code.
(x) Except that no provision is contained in the Financial
Statements for accumulated sick days which are not vested and for
unused time off pertaining to birthday anniversaries of Florida-based
employees with service dates prior to January 1, 1989, actuarially
adequate accruals for all obligations under the Benefit Plans are
reflected in the consolidated financial statements of the Company and
its Subsidiaries and such obligations include a pro rata amount of the
contributions which would otherwise have been made in accordance with
past practices and applicable law for the plan years which include the
Closing Date.
(xi) There has been no act or omission that would impair the
ability of the Company or its Subsidiaries (or any successor thereto)
to unilaterally amend or terminate any Benefit Plan.
6.13 Permits. The Company and its Subsidiaries hold all of the Permits
described on Schedule 6.13, copies of each of which shall be delivered to the
Purchaser prior to the Closing Date. No provision, condition or limitation of
any of the Permits listed on Schedule 6.13 has been breached or violated, and no
other Permits are currently required for the lawful operation of the Business,
except for those the absence of which would not have a Material Adverse Effect.
The Company has not misrepresented or failed to disclose any material relevant
fact in obtaining all Permits, and the Company has no Knowledge of any change in
the circumstances under which any of the Permits were obtained that would result
in their termination, suspension, modification or limitation. The Company has
not taken any action (or failed to take any action), the omission of which would
result in the revocation of any of the Permits. No Permit will be terminated or
modified as a result of the transactions contemplated by this Agreement or the
Related Agreements and all Permits will be in effect immediately after the
Closing.
6.14 Taxes. (a) The amount provided on the Closing Estimation for all
Taxes imposed by any taxing authority are adequate to cover all unpaid
liabilities for all Taxes (including any interest or penalties with respect to
such Taxes), whether or not disputed, that have accrued with respect to or are
applicable to the period ended on and including the Closing Date or to any years
and periods prior thereto and for which the Company may be directly or
contingently liable in its own right or as a transferee of the assets of, or
successor to, any Person. The Company has not incurred any Tax liabilities other
than in the ordinary
36
course of business for any taxable year for which the applicable statute of
limitations has not expired; there are no Tax Liens (other than Liens for
current Taxes not yet due and payable) upon the properties or assets of the
Company. There exist no open extensions or waivers of any statute of limitations
or requests therefor applicable to any claim against the Company for Taxes.
(b) All federal, state, local and foreign Tax returns required to be
filed by or with respect to the Company or its Subsidiaries through the Closing
Date have been or will be accurately prepared in all material respects, and have
been or will be duly and timely filed, and all Taxes shown as due and payable
thereon (including Taxes withheld from employees' salaries and all other
withholding Taxes and obligations and all deposits required to be made by or
with respect to the Company or its Subsidiaries with respect to such withholding
Taxes or otherwise), interest, penalties, assessments and/or deficiencies due
with respect to any taxable period or partial taxable period of the Company or
its Subsidiaries ending on or before the Closing Date have been or will be
timely paid, or to the extent not due and payable as of the Closing Date,
adequate provision for the payment thereof has been or will be made on the
consolidated financial statements or the books of account of the Company and its
Subsidiaries. Each such return and filing is true and correct in all material
respects and the Company neither has nor will have any additional liability for
Taxes with respect to any return or other filing heretofore filed or which was
required by law to be filed, other than as reflected as liabilities in the
computation of Net Value.
(c) Except as set forth in Schedule 6.14(c): (i) with respect to each
taxable period of the Company and its Subsidiaries ending prior to the date
hereof either such taxable period has been audited by the IRS or other taxing
authority, and such audit has been completed without the issuance of any notice
of deficiency or similar notice of additional liability or the time for
assessing or collecting income tax with respect to each such taxable period has
closed and such taxable period is not subject to review by the IRS or such other
taxing authority to the Knowledge of the Company and no facts exist which would
constitute grounds for the assessment of any additional Taxes by any taxing
authority with respect to the taxable years covered in such returns and filings;
(ii) the Company and its Subsidiaries have not made any election under Section
341(f) of the Code (or any corresponding provision of state or local income tax
law); (iii) the Company and its Subsidiaries have not been a member of an
affiliated group (as defined in Section 1504(a) of the Code) or filed or been
included in a combined, consolidated or unitary income tax return other than an
affiliated group of which the Company was a parent; (iv) Purchaser will not be
required to deduct and withhold any amount pursuant to Section 1445(a) of the
Code upon the transfer of the Shares to Purchaser; (v) the Company and its
Subsidiaries are not required to make any material adjustment under Section
481(a) of the Code by reason of a change or proposed change in accounting method
or otherwise; and (vi) the Company has not received notice from any Tax
Authority that a material issue has been raised with respect to the Company and
its Subsidiaries in any audit or examination which, by application of similar
principles, could reasonably be expected to result in proposed material
adjustment to the liability for Taxes for any period not so examined.
37
(d) The basis of all depreciable or amortizable assets as set forth on
Schedule 6.14(d), and the methods used in determining allowable depreciation or
amortization (including cost recovery) deductions of the Company and its
Subsidiaries, are correct in all material respects and in compliance with the
Code and the regulations thereunder.
(e) The Company and its Subsidiaries are not liable for the Taxes of
any taxpayer other than the Company for any taxable period beginning before the
Closing Date.
(f) The Company is not obligated to make, and as a result of any event
connected with the transactions contemplated by this Agreement or the Related
Agreements, will not become obligated to make, any "excess parachute payment"
within the meaning of Section 280G of the Code, determined without regard to
subsection (b)(4) thereof.
(g) The Company is not a party to and is not otherwise subject to any
arrangement having the effect of or giving rise to the recognition of a
deduction or loss in a taxable period ending on or before the Closing Date, and
a corresponding recognition of taxable income or gain in a taxable period ending
after the Closing Date, or any other arrangement that would have the effect of
or give rise to the recognition of taxable income or gain in a taxable period
ending after the Closing Date without the receipt of or entitlement to a
corresponding amount of cash.
(h) The Company is not subject to any joint venture, partnership or
other arrangement or contract which is treated as a partnership for Federal
income tax purposes. Except as set forth in Schedule 6.14(h), the Company is not
a party to any tax sharing agreement.
(i) None of the assets of the Company constitutes tax-exempt bond
financed property or tax-exempt use property within the meaning of Section 168
of the Code, and none of the assets reflected on the Financial Statements of the
Company is subject to a lease, safe harbor lease or other arrangement as a
result of which the Company is not treated as the owner for Federal income tax
purposes.
(j) The Company has no Knowledge of, nor has it received any notice of,
any special Taxes or assessments relating to the Real Property of any part
thereof, including Taxes relating to the business of the Real Property, or any
planned public improvements that may result in a special tax or assessment
against the Real Property, that are not otherwise disclosed in the Title
Commitment. To the Company's Knowledge, there is not any proposed increase in
the assessed valuation of the Real Property for Tax purposes.
(k) Except as set forth on Schedule 6.14(k), all revenue with respect
to the Long- term Receivables has been previously reported to all required Tax
Authorities and any income taxes with respect to such revenue has been fully
paid or accrued by the Company.
38
6.15 Environmental Matters.
(a) The Company and its Subsidiaries are in material
compliance with all Environmental Laws in effect as of the date hereof,
and no condition exists or event has occurred which, with or without
notice or the passage of time or both, would constitute a violation of
or give rise to any Lien under any Environmental Law or any other
material Environmental Liabilities and Costs;
(b) The Company and its Subsidiaries are in possession of all
Environmental Permits required for the conduct or operation of its
business (or any part thereof), and are in material compliance with all
of the requirements, conditions and limitations included in such
Environmental Permits;
(c) To the Knowledge of the Company, there are no, and the
Company and its Subsidiaries have not used or stored any, Hazardous
Material in, on, or at any of the properties or facilities now or
previously owned or leased by the Company or its Subsidiaries except
for inventories of substances listed on Schedule 6.15(c) that are used
or are to be used in the ordinary course of business (which inventories
have been stored, used and disposed of in accordance with all
applicable Environmental Laws and Environmental Permits, including all
so-called "Right To Know Laws");
(d) Except as set forth on Schedule 6.15(d), neither the
Company nor any of its Subsidiaries has received any notice from any
Authority or any other Person that any past or present aspect of the
business, operations or facilities (whether owned or leased) of the
Company or its Subsidiaries is in violation of any Environmental Law or
Environmental Permit, or that the Company or its Subsidiaries is
responsible or liable (or potentially responsible or liable) for the
investigation, cleanup or remediation of any Hazardous Materials at any
location;
(e) Neither the Company nor any of its Subsidiaries is the
subject of any litigation or proceedings in any forum, judicial or
administrative, involving a demand for damages, injunctive relief,
penalties, or other potential liability with respect to violations of
or liability under any Environmental Law;
(f) Except as set forth on Schedule 6.15(d), no underground
storage tanks are, or have been, located at the properties or
facilities now or previously owned or leased by the Company or its
Subsidiaries except in accordance with applicable law.
(g) The Company and its Subsidiaries have timely filed all
reports and notifications required to be filed with respect to all of
its operations, properties and facilities (whether owned or leased) and
has generated and maintained all required records and data under all
applicable Environmental Laws; and
39
(h) Except as set forth on Schedule 6.15(h), neither the
Company, its Subsidiaries nor any corporation or other entities that
has merged with or into the Company or any of its Subsidiaries has
transported or arranged for the transportation of any Hazardous
Material to any location which is listed or proposed for listing on the
National Priorities List pursuant to CERCLA or on any similar state
list.
6.16 Customer and Supplier Relationships. Except in accordance with
past experience of the Company, to the Knowledge of the Company, no customer or
supplier has indicated an intent to discontinue or materially change its
commercial relationship with the Company or any Subsidiary which would have a
Material Adverse Effect.
6.17 Litigation; Compliance with Laws. Except as disclosed on Schedule
6.17, there are no claims, actions, suits or proceedings pending or, to the
Knowledge of the Company, threatened against or affecting (i) the Company or its
Subsidiaries, (ii) any of the officers or directors of the Company or its
Subsidiaries, (iii) the employees of the Company or its Subsidiaries in their
capacities as such, (iv) the Resort Holders in their capacities as such (v) or
the Shareholders listed on Schedule I in their capacity as shareholders, or (vi)
any of the properties or business of the Company or its Subsidiaries. Schedule
6.17 sets forth each instance in which the Company or its Subsidiaries (i) is
subject to any unsatisfied judgment, order, decree, stipulation, injunction, or
charge, (ii) is a party to any charge, complaint, action, suit, proceeding,
hearing, or, to the Knowledge of the Company, investigation of or in any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction, (iii) is subject to any Liability or knows of any
threatened Liability with respect to SEC or National Association of Securities
Dealers, Inc. matters. Neither the Company nor any of its Subsidiaries is in,
nor has it received notice within the past three years of any, violation of any
material laws, rules, regulations, ordinances, orders, judgments and decrees
applicable to its business, properties or operations as presently conducted.
Each of the Company and its Subsidiaries possesses, is presently in substantial
compliance with and in the previous two years has received no notice of material
violations of any license, permit, consent, authorization or approval of or from
any governmental body having jurisdiction over it necessary to conduct its
business as presently conducted except where the failure to hold any such
license or the failure to be in compliance would not have a Material Adverse
Effect.
6.18 Labor Matters. To the Knowledge of the Company, no key employee or
group of employees has any plans to terminate employment with the Company or its
Subsidiaries. Schedule 6.18 sets forth the names and annual compensation
(including salary, bonuses and commissions) as of December 31, 1996, of all
salaried employees of the Company and its Subsidiaries having total annual
compensation in excess of $25,000. The Company and its Subsidiaries have
complied in all material respects with all applicable foreign, federal and state
laws relating to the employment of labor including the provisions thereof
relating to wages, hours, collective bargaining and the payment of social
security and other taxes and to the Knowledge of the Company, the Company and
its Subsidiaries are not liable for any arrears of wages or any tax or any
penalty for failure to comply with any of the foregoing.
40
There are no controversies or disputes pending or, to the Knowledge of the
Company, threatened between the Company and its Subsidiaries and their employees
which could reasonably be expected to have a Material Adverse Effect. There are
no collective bargaining agreements currently binding on or being negotiated
with respect to the business of the Company and its Subsidiaries. There are no
pending petitions by labor unions to the National Labor Relations Board for
certification as representative of any employees of the Company or its
Subsidiaries. The Company and its Subsidiaries have not experienced any strikes,
grievances, claims of unfair labor practices or lockouts. The aggregate amount
of all vested vacation benefits, and an accrual of non-vested vacation benefits,
for all employees of the Company and its Subsidiaries is fully reflected in the
Financial Statements and will be fully reflected in the Net Value of the Company
as of the Closing Date.
6.19 No Adverse Change. Except as listed on Schedule 6.19, since
December 31, 1996, there has not been (i) any event, occurrence, development or
other matter that could have a Material Adverse Effect, (ii) any material loss
or damage (whether or not covered by insurance) to any of the Company's or its
Subsidiaries' assets, that materially affects or impairs the ability of the
Company and its Subsidiaries to conduct the Business, or any other event or
condition of any character that has materially and adversely affected the
business or operation of the Company or its Subsidiaries, (iii) any contract or
other transaction entered into by the Company or its Subsidiaries relating to,
or otherwise affecting in any way, the Business or the operation thereof, other
than in the ordinary course of business, (iv) any sale or transfer of the
Company's or its Subsidiaries assets, or any cancellation of any debts or claims
of the Company or its Subsidiaries, except in the ordinary course of business,
(v) any material and adverse changes in the terms of any instruments, accounts,
notes, Contracts, other than in the ordinary course of business, (vi) any
changes in the accounting systems, policies or practices of the Company or its
Subsidiaries, (vii) any express waiver by the Company or its Subsidiaries of any
rights which have any value to the extent such waiver would have a Material
Adverse Effect, (viii) any transactions with any of the Company's Affiliates,
the Shareholders or any Shareholders' Affiliate, (ix) any increase in the
compensation of officers or employees of the Company or its Subsidiaries
(including any such increase pursuant to any bonus, pension, profit-sharing or
other plan or commitment) or any increase in the compensation payable or to
become payable to any officer or employee of the Company or its Subsidiaries,
other than, with respect only to employees whose annual salary or wages do not
exceed $50,000 per employee, in the ordinary course of business, (x) any
incurrence of any Lien, security interest, pledge, mortgage, encumbrance,
restriction or change of any kind permitted or allowed with respect to any of
the properties, business or assets of the Company or its Subsidiaries, except
Permitted Liens, (xi) any declaration, setting aside, making or paying of any
dividend or other distribution in respect of its capital stock (other than in
the ordinary course of business, consistent with past practices) or any direct
or indirect redemption, purchase or other acquisition of any shares of the
Company's or its Subsidiaries' capital stock, (xii) any setting aside, making or
incurring of any capital expenditure or commitment, or series of related capital
expenditures or commitments, by the Company or its Subsidiaries in the aggregate
amount above $125,000, or (xiii) any material
41
decrease in the amount of the Company's or its Subsidiaries' reserves and
accruals that is outside of the ordinary course of business inconsistent with
past practice.
6.20 Tangible Property and Title. (a) Schedule 6.20(a)(i) sets forth a
complete and accurate list of all licensed vehicles of the Company and its
Subsidiaries. Schedule 6.20(a)(ii) sets forth depreciation schedules of the
Company and its Subsidiaries as of December 31, 1996. Schedule 6.20(a)(iii) sets
forth a capital expenditure analysis of the Company and its Subsidiaries for the
year ended December 31, 1996. The tangible personal property listed on Schedule
6.20 hereto includes all leases by the Company or its Subsidiaries of any item
of personal property that is used in connection with the operation of the
Business. All of the tangible personal property owned or leased by the Company
or its Subsidiaries is currently utilized by the Company or its Subsidiaries in
the ordinary course of the business and operation of the Business and is in good
operating condition and repair (with the exception of normal wear and tear),
free from defects other than such minor defects as do not interfere with the
continued use thereof in the conduct of normal operations. The Company has
delivered to Purchaser true, correct and complete copies of all personal
property leases.
(b) The Company and its Subsidiaries have good title to, and are the
lawful owner of, all of the assets and properties that are reflected in the
Financial Statement or are material to the Business, free and clear of any Lien,
mortgage, right of first refusal, security interest or encumbrance, except for
(a) Liens which shall be removed prior to, or coincident with, the Closing; (b)
mechanics', carriers', landlords', worker's and other similar Liens imposed by
law arising in the ordinary course of business; (c) Liens and encumbrances which
would not have a Material Adverse Effect; (d) Liens for taxes not yet due and
payable for which full reserves are reflected in the Financial Statements to the
extent accrued; (e) matters disclosed on the Title Commitment excluding those
matters which the Company is obligated to have deleted from the Title Commitment
as set forth in the definition of "Title Commitment" herein; (f) Liens set forth
on Schedule 6.20; (g) reservations or exceptions in acts authorizing the
issuance of mining claims; and (h) claims or title to the Water Rights;
provided, however, that the Company and its Subsidiaries warrant and represent
that they have not sold or otherwise conveyed title to the Water Rights
(collectively, the "Permitted Liens"). The Company and its Subsidiaries have
good and merchantable title to all of the tangible personal property owned by
the Company and its Subsidiaries and the right to convey the same in accordance
with this Agreement.
6.21 Bank Accounts. Schedule 6.21 sets forth a true, complete and
correct list of each bank, deposit, lockbox or cash collection, management or
other account, of the Company and its Subsidiaries, including the title and
number of the account and the financial or other institution at which such
account is located.
6.22 Insolvency Proceedings. No insolvency proceeding has ever been
brought against the Company and no petition has been filed against the Company
for compulsory or voluntary winding up, dissolution or bankruptcy. No receiver
has been appointed or applied
42
for nor has any attachment been granted with respect to the Business or the
assets of the Company. The Company has taken no action that would entitle any
person to initiate insolvency proceedings against it.
6.23 Broker's Fees. The Company has no liability or obligation to pay
any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement or the Related Agreements, and
neither Purchaser nor any Affiliate of Purchaser has or shall have any liability
or otherwise suffer or incur any Loss as a result of or in connection with any
brokerage or finder's fee or other commission of any person retained by the
Company in connection with any of the transactions contemplated by this
Agreement or the Related Agreements.
6.24 Accuracy of Statements. Neither this Agreement, any Related
Agreement nor any schedule, exhibit, statement, list, document, certificate or
other information furnished or to be furnished by or on behalf of the Company or
the Resort Holders or, to the extent such information has been delivered to the
Company, the Shareholders on Schedule I hereto, to Purchaser or any
representative or Affiliate of Purchaser in connection with this Agreement, the
Related Agreements or any of the transactions contemplated hereby or thereby
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they are made, not
misleading.
6.25 Liabilities Relating to Former Shareholders. As of the Closing
Date, after the payments to be made by Purchaser hereunder to the Shareholders
have been delivered to the Exchange Agent, the Company will not have any
liability or obligation whatsoever, contingent or otherwise, to any former
holder of shares of capital stock of the Company.
6.26 Management Agreements. Schedule 6.26(a) is a true and complete
listing of all amounts that the Company and its Subsidiaries owe to Hilton on
the date hereof, whether such amounts are currently due. The Company reasonably
believes, based on its financial performance as of the date hereof, that the
Surviving Corporation will be able to terminate the Innisbrook Management
Agreement, without payment of any penalty or early termination payment, pursuant
to Section 8.08.1 of such Management Agreement. Set forth on Schedule 6.26(b) is
a worksheet setting forth a detailed statement of the calculation required by
Section 8.08.1 of the Innisbrook Management Agreement, for the 1996 Operating
Year and the 1997 Operating Year as of the date hereof. The terms 1996 Operating
Year and 1997 Operating Year shall have the meaning given in the Innisbrook
Management Agreement. Subject to Section 8.19(h), the Company, the Shareholders
and the Resort Holders acknowledge that the Surviving Corporation may terminate
each of the Management Agreements in accordance with Section 8.08.1 thereof.
6.27 Principal Place of Business. The Company's principal place of
business is in the State of Florida at 36750 U.S. Highway 19 North, Palm Harbor,
Florida 34684 and Resort's principal place of business is the State of Florida
at 36750 U.S. Highway 19 North,
43
Palm Harbor, Florida 34684. Except as set forth on Schedule 6.9, the Company or
Resorts do not do business under any trade name or fictitious business name
other than Golf Hosts, Inc., Golf Host Resorts, Inc., Golf Host Development,
Inc., Golf Host Securities, Inc. or Golf Host Realty, Inc.
6.28 Opinion of Financial Advisor. The Company has received a draft of
the opinion and as of the Closing Date will have received a final copy of the
opinion (the final copy of such opinion being referred to as the "Fairness
Opinion") of Comstock Valuation Advisors, Inc. to the effect that, as of the
date hereof, the Merger Consideration is fair to the Shareholders from a
financial point of view, a true and complete copy of which draft and final
opinion has been delivered to Purchaser prior to the date hereof and the Closing
Date, respectively.
6.29 Shareholder Consent. Shareholders holding in excess of 51% of the
Shares entitled to vote to approve the Merger have approved the Merger by
executing Shareholder Consents that have been delivered to the Purchaser.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser (which term shall include only the Purchaser and in no event
the Surviving Corporation), represents and warrants to the Company and the
Resort Holders that:
7.1 Due Incorporation. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida
with all requisite power and authority to own and operate its assets and
properties as they are now being owned and operated.
7.2 Due Authorization. (a) Purchaser has duly and validly executed and
delivered this Agreement and has duly and validly executed and delivered (or
prior to or at the Closing will duly and validly execute and deliver) the
Related Agreements to which Purchaser is a party. This Agreement constitutes the
legal, valid and binding obligation of Purchaser and the Related Agreements to
which Purchaser is a party upon execution and delivery by Purchaser will
constitute legal, valid and binding obligations of Purchaser, in each case,
enforceable against Purchaser in accordance with their respective terms.
(b) Purchaser has full power and authority to enter this Agreement and
the Related Agreements and to consummate the Merger and the other transactions
contemplated hereby and thereby. The execution, delivery and performance by
Purchaser of this Agreement and the Related Agreements to which Purchaser is a
party have been duly and validly approved by all required action or proceeding
on the part of Purchaser necessary to authorize this Agreement, the Related
Agreements and the transactions contemplated hereby and thereby.
44
7.3 Consents and Approvals; Authority Relative to this Agreement. The
execution, delivery and performance by Purchaser of this Agreement and the
Related Agreements to which Purchaser is a party will not (a) violate any
governmental authority applicable to Purchaser, or (b) with or without the
passage of time or the giving of notice or both, result in the breach of, or
constitute a default or require any consent under any Contract to which
Purchaser is a party or by which any of Purchaser's assets or properties are
bound, or result in the creation of any Lien upon any property or assets of
Purchaser pursuant to any instrument or agreement to which Purchaser is a party
or by which Purchaser's properties may be bound or affected, except in each case
where any such filing, registration, consent or approval, if not made or
obtained, or any such violation, conflict, breach or default, would not have a
Material Adverse Effect on Purchaser or Purchaser's ability to perform
Purchaser's obligations under this Agreement and the Related Agreements to which
Purchaser is a party. Except for filing and recordation of the Articles and Plan
of Merger as required by the BCA, no consent, approval, order or authorization
of, or registration, declaration or filing with, any government agency or public
or regulatory unit, agency, body or Authority with respect to Purchaser is
required in connection with the execution, delivery or performance of this
Agreement or the Related Documents by Purchaser or the consummation of the
transactions contemplated hereby or thereby.
7.4 Hart-Scott-Rodino. The transactions contemplated hereby are not
subject to the pre-merger notification and waiting period requirements under the
HSR Act.
7.5 Brokers Fees. Purchaser has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement or the Related Agreements, and
neither the Resort Holders, the Shareholders nor any Affiliate thereof shall
have any liability or otherwise suffer or incur any Loss as a result of or in
connection with any brokerage or finder's fee or other commission of any Person
retained by Purchaser in connection with any of the transactions contemplated by
this Agreement or the Related Agreements.
7.6 Investment. Purchaser is acquiring Shares and the Resort Shares for
its own account and with no present intention of distributing or reselling such
Shares or Resort Shares in any transaction that would be in violation of the
securities laws of the United States or any state thereof, without prejudice,
however, to Purchaser's rights at all times, to sell or otherwise dispose of all
or any part of the Shares and Resort Shares under an effective registration
statement under the Securities Act, or under an exemption from such registration
available under the Securities Act and applicable state securities laws.
45
ARTICLE VIII
COVENANTS
8.1 Access to Information and Facilities. From the date of this
Agreement to the Closing Date, the Company shall give Purchaser and Purchaser's
representatives, lenders, financiers and financial and legal advisors (the
"Purchaser's Representatives") reasonable access during normal business hours to
the offices, facilities, books and records of the Company and its Subsidiaries,
and shall make the officers and employees of the Company and its Subsidiaries
available to Purchaser and Purchaser's Representatives as Purchaser and
Purchaser's Representatives shall from time to time reasonably request, in each
case to the extent that such access and disclosure would not obligate the
Company to take any actions that would unreasonably disrupt the normal course of
its businesses or violate the terms of any Contract to which the Company or its
Subsidiaries is bound or any applicable law or regulation. Except as required by
any Authority, all information supplied to Purchaser pursuant to this Section
shall be maintained in strict confidence by Purchaser, and in the event that
this Agreement is terminated, all written materials relating thereto shall be
returned to the Company or destroyed, and Purchaser shall make no further use of
such information whatsoever; provided, however, that nothing in this Section
shall preclude Purchaser from sharing such information with the Purchaser's
Representatives or keeping one record copy of any such materials in Purchaser's
files or from disclosing the existence of this Agreement and the transactions
contemplated hereby in accordance with the securities laws of the United States.
8.2 Preservation of Business. From the date of this Agreement until the
Closing Date, the Company and each of its Subsidiaries shall be operated in the
ordinary and usual course of business and consistent with past practice, and
shall use commercially reasonable efforts to preserve intact the present
business organization and personnel of the Company and each of its Subsidiaries,
preserve the business relationships of the Company and each of its Subsidiaries
with other Persons material to the operation of the Company or its Subsidiaries,
and not permit any action or omission which would cause any of the
representations or warranties of the Company contained herein to become
inaccurate or any of the covenants of the Company to be breached. Without
limiting the generality of the foregoing, except as set forth in Schedule 8.2,
prior to the Closing the Company and each of its Subsidiaries will not, without
the prior written consent of Purchaser, which consent will not be unreasonably
withheld:
(a) other than in the ordinary course of business and
consistent with past practice, incur any obligation or enter into any
Contract (including any agreement to construct or develop the Sandpiper
Expansion or any agreement to sell any portion of the Real Property)
which either (i) requires a payment by any party in excess of, or a
series of payments which in the aggregate exceed, $25,000, or provides
for the delivery of goods or performance of services, or any
combination thereof, having a
46
value in excess of $50,000, or (ii) has a term of, or requires the
performance of any obligations by the Company or any of its
Subsidiaries over a period in excess of, twelve months;
(b) take any action, or enter into or authorize any Contract
or transaction, other than in the ordinary course of business and
consistent with past practice and other than any transactions
contemplated by this Agreement or the Related Agreements;
(c) sell, transfer, convey, assign or otherwise dispose of any
of its assets or properties, except sales of inventory and exhausted
equipment or equipment replaced in the ordinary course of business and
consistent with past practice;
(d) except in the ordinary course of business and consistent
with past practice, waive, release or cancel any claims against third
parties or debts owing to it, or any rights which have any value;
(e) make any changes in its accounting systems, policies,
principles or practices;
(f) (1) enter into, authorize, or permit any transaction with
the Shareholders, the Resort Holders or any Affiliates of the
Shareholders or Resort Holders, except in the ordinary course of
business consistent with past practice, transactions with such
individuals in their capacity as an employee of the Company or its
Subsidiaries, or (2) modify any compensation amounts or levels of any
officer, director or, except in the ordinary course of business
consistent with past practices, any employee;
(g) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, convertible or exchangeable securities,
commitments, subscriptions, rights to purchase or otherwise) any shares
of capital stock or any other securities, or amend any of the terms of
any such capital stock or other securities;
(h) except as set forth on Schedule 6.1(d), split, combine, or
reclassify any shares of its capital stock, declare, set aside or pay
any dividend or other distribution (whether in cash, stock or property
or any combination thereof) in respect of its capital stock, or redeem
or otherwise acquire any capital stock or other securities of the
Company or any of its Subsidiaries;
(i) prepay any Indebtedness, make any borrowings, incur any
debt, or assume, guarantee, endorse (except with respect to existing
credit lines and for the negotiation or collection of negotiable
instruments in the ordinary course of business and consistent with past
practice) or otherwise become liable (whether directly, contingently or
otherwise) for the obligations of any other Person, or make any
47
payment or repayment in respect of any Indebtedness (other than trade
payables in the ordinary course of business and consistent with past
practice and payments required to be made in accordance with the terms
of such Indebtedness); provided, that the Company may incur up to
$1,500,000 in Indebtedness from Barnett Bank to fund Sandpiper
Expenditures (the "Construction Loan") on the terms and conditions set
forth in the commitment letter from Barnett Bank to the Company dated
as of November 8, 1996;
(j) except as set forth on Schedule 6.5, make any loans,
advances or capital contributions to, or investments in, any other
Person, except for advances to customers and employees in the ordinary
course of business consistent with past practices;
(k) except for the hiring consistent with past practices of
any new employees whose annual salary or wages do not exceed $50,000
per employee, enter into (except with respect to current employees that
become eligible for benefits that are in place as of the date hereof
consistent with past practices), adopt, amend or terminate any bonus,
profit sharing, compensation, termination, stock option, stock
appreciation right, restricted stock, performance unit, pension,
retirement, deferred compensation, employment, severance or other
employee benefit agreements, trusts, plans, funds or other arrangements
for the benefit or welfare of any director, officer or employee, or
increase in any manner the compensation or fringe benefits of any
director, officer or employee or pay any benefit not required by any
existing plan and arrangement or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing;
(l) other than pursuant to the Construction Loan, acquire,
lease or encumber any assets (including intellectual property) outside
the ordinary course of business or any assets which are material to the
Company or any of its Subsidiaries;
(m) except for expenditures made in the ordinary course of
business and consistent with past practice, and for Sandpiper
Expenditures, authorize or make any capital expenditures which
individually are in excess of $50,000 or in the aggregate are in excess
of $125,000 or make any capital expenditure with respect to the
Sandpiper Expansion;
(n) make any Tax election or settle or compromise any federal,
state, local or foreign income Tax liability, or waive or extend the
statute of limitations in respect of any such Taxes or make any payment
of Taxes not yet due;
(o) pay any amount, perform any obligation or agree to pay any
amount or perform any obligation, in settlement or compromise of any
suits or claims of liability against the Company, any of its
Subsidiaries, or their directors, officers, employees or agents;
48
(p) terminate, modify, amend or otherwise alter or change any
of the terms or provisions of any Material Contract, or pay any
material amount not required by Law or by any Contract;
(q) incur, create or suffer to exist any Liens other than
Permitted Liens;
(r) amend the Articles of Incorporation and By-laws of the
Company or any of its Subsidiaries; or
(s) communicate with Hilton in writing with respect to this
Agreement or the transactions contemplated hereby.
8.3 Exclusivity. Prior to the termination of this Agreement, neither
the Company, nor any of its Subsidiaries nor the Board of Directors of any shall
solicit, initiate, or encourage the submission of any proposal or offer from any
person relating to any (i) liquidation, dissolution, or recapitalization, (ii)
merger or consolidation, (iii) acquisition or purchase of all, substantially all
or a material amount of stock, securities or assets (other than inventories and
other assets in the ordinary and usual course of business and consistent with
past practices), or (iv) similar transaction or business combination involving
any of the Company or its Subsidiaries.
8.4 Shareholder Matters. (a) The Company shall deliver a copy of this
Agreement (exclusive of the Disclosure Schedule) to each Shareholder prior to
execution of a Letter of Transmittal by such Shareholder and to each Shareholder
on Schedule I, a draft of this Agreement prior to execution of a Shareholder
Consent by such Shareholder.
(b) The Company shall call a special meeting of its Shareholders to be
held as soon as practicable after the date hereof but no later than 20 business
days after the date hereof for the purpose of voting upon the matters relating
to this Agreement and the Merger (the "Special Shareholders Meeting"). The
Company will use its best efforts to hold such Special Shareholders Meeting as
promptly as practicable and will, through its Board of Directors, recommend to
its Shareholders approval of the Merger and this Agreement at such Special
Shareholders Meeting; provided, however, that such recommendation is subject to
any action taken by the Board of Directors in the exercise of its good faith
judgment as to its fiduciary duties to the Shareholders of the Company.
(c) The Company shall deliver to Purchaser promptly after the
conclusion of the Special Shareholders Meeting contemplated by Section 8.4(b)
hereof a certificate of the secretary of the Company (the "Certificate of
Objections") stating the number of Shares as to which written notice of the
Shareholder's intent to demand payment were filed prior to the vote thereon in
accordance with Section 607.1320 of the BCA and that were not voted in favor of
the Merger and the adoption of this Agreement, such Certificate to include the
names, mailing addresses and number of Shares owned of record by each such
Shareholder who shall have filed such notice. Promptly after the conclusion of
the Special Shareholders
49
Meeting contemplated by Section 8.4(b), the Company shall deliver to each
Shareholder who shall have filed notice of intent to demand payment and was not
voted in favor of the Merger a written dissenters' notice, pursuant to and in
compliance with Section 607.1320 of the BCA, with a return date for payment
demand of 30 days.
8.5 Deposit Amount. Purchaser shall deposit the Deposit Amount with the
Escrow Agent in accordance with the Deposit Escrow Agreement within the later of
(a) seven business days from the later of (i) the execution of this Agreement by
the Company and the Resort Holders and (ii) receipt by the Purchaser of
Shareholder Consents from the Resort Holders and the Shareholders listed on
Schedule I hereto and copies of the resolutions of the Board of Directors
evidencing the authorization of this Agreement and the transaction contemplated
hereby and the approval of the consummation of the Merger, certified by the
secretary of the Company and (b) two business days after a copy of the Fairness
Opinion has been delivered to the Purchaser.
8.6 Best Efforts; Further Assurances; Cooperation. Subject to the other
provisions of this Agreement, the parties hereto shall each use their best
efforts to perform their obligations herein and to take, or cause to be taken or
do, or cause to be done, all things necessary, proper or advisable under
applicable law to obtain all regulatory approvals and satisfy all conditions to
the obligations of the parties under this Agreement and to cause the Merger and
the other transactions contemplated herein to be effected and shall cooperate
fully with each other and their respective officers, directors, employees,
agents, counsel, accountants and other designees in connection with any steps
required to be taken as a part of their respective obligations under this
Agreement, including without limitation:
(a) The parties shall promptly (i) make their respective filings and
submissions, and shall take, or cause to be taken, all actions and do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to obtain any required approval of any other federal, state or local
governmental agency or regulatory body with jurisdiction over the transactions
contemplated by this Agreement and the Related Agreements and will furnish to
each other such information and assistance as reasonably may be requested in
connection with the foregoing and (ii) take all reasonable steps (not including
the expenditure of money or the payment or delivery of other consideration) to
obtain all other required consents of other Persons with respect to the
transactions contemplated hereby.
(b) The Company and the Resort Holders shall each complete, execute,
enter into, deliver and perform the Related Agreements to which they are a
party.
(c) The Company will provide full access to and respond to all
reasonable inquiries of Purchaser's lenders, financiers and financial and legal
advisors.
(d) The Company will use its best efforts to cause all holders of
Shares to (i) execute a Letter of Transmittal and (ii) tender their Shares
pursuant to the terms of this Agreement.
50
(e) Reserved.
(f) In the event any claim, action, suit, investigation or other
proceeding by any governmental body or other person is commenced which questions
the validity or legality of the Merger or any of the other transactions
contemplated hereby or seeks damages in connection therewith, the parties agree
to cooperate and use all reasonable efforts to defend against such claim,
action, suit, investigation or other proceeding and, if an injunction or other
order is issued in any such action, suit or other proceeding, to use all
reasonable efforts to have such injunction or other order lifted, and to
cooperate reasonably regarding any other impediment to the consummation of the
transactions contemplated by this Agreement.
(g) Purchaser and the Company shall each use commercially reasonable
efforts to accommodate reasonable changes to the nature of the transactions
contemplated hereby as requested by Purchaser, the Resort Holders or the Company
because of changes to United States tax laws and regulations that become
effective after the date hereof but before or on the Closing Date that would be
mutually advantageous to Purchaser, the Resort Holders and the Company; provided
that such changes shall not have a material effect on the amount and nature of
the consideration paid by Purchaser to the Resort Holders and the Shareholders
or a Material Adverse Effect on Purchaser or its tax position.
(h) The Company shall deliver to the Title Company and the surveyor
preparing the Survey such affidavits, instruments, documents, releases and
agreements and shall perform such acts as the Title Company or the surveyor
shall reasonably require in order to issue the Title Commitment, the
endorsements thereto and the Survey.
8.7 Supplemental Information; Notice of Developments. (a) The Company
will, from time to time, as necessary, prior to or at the Closing, by notice in
accordance with the terms of this Agreement, supplement or amend the Disclosure
Schedule, including one or more supplements or amendments to correct any matter
which would constitute a breach of any representation, warranty, agreement or
covenant contained herein; provided that neither this Agreement nor any Schedule
shall be amended or supplemented without the written consent of such amended or
supplemental Schedule by Purchaser.
(b) In the event that, upon receiving any supplements to the Disclosure
Schedule or notices of developments pursuant to Section 8.7(b), including,
without limitation, any requirement for environmental remediation with respect
to the Real Property, Purchaser in good faith reasonably determines that (i) the
preparation and review of such supplements or notices reveal information which
would have constituted, if known to Purchaser as of the date of this Agreement,
a material breach of this Agreement or would have required a material change to
the Disclosure Schedule or exhibits, or which otherwise would have, in the good
faith reasonable view of Purchaser, a Material Adverse Effect, or (ii) such
analysis has led Purchaser to perceive or appreciate circumstances or facts
which, if fully perceived or appreciated by Purchaser at the date of this
Agreement, would have, in the good faith reasonable view of Purchaser, a
Material Adverse Effect (collectively, a "Problem"), then
51
Purchaser will promptly notify the Company of such Problem, and the parties will
together use reasonable efforts in good faith to eliminate or resolve such
Problem. Subject to Section 11.1, if, notwithstanding such efforts, such Problem
is not eliminated, resolved or negotiated by August 15, 1997 (or such later date
that is 10 business days after receiving such supplement or notice) to the
reasonable satisfaction of Purchaser, then Purchaser may, at any time within 30
days thereafter, terminate this Agreement by written notice thereof to the
Company, in which case, no party will have any obligations or liabilities
pursuant to this Agreement other than as provided in Section 11.1.
(c) The Company will give prompt written notice to Purchaser of any
material development affecting the assets, liabilities, Business, financial
condition, operations, results of operations, or future prospects of the Company
or any of its Subsidiaries. The Company will give prompt written notice to
Purchaser of any material development affecting the ability of the Company to
consummate the transactions contemplated by this Agreement. Purchaser will give
prompt written notice to the Company of any material development affecting the
ability of Purchaser to consummate the transactions contemplated by this
Agreement. No disclosure by the Company or Purchaser, including any amendment or
supplement to the Disclosure Schedule pursuant to this Section 8.7, however,
shall be deemed to amend or supplement any Disclosure Schedule hereto or to
prevent or cure any misrepresentation, breach of warranty, or breach of covenant
unless the Agreement is amended or such misrepresentation or breach is waived or
consented to in writing and the transactions contemplated hereby are consummated
pursuant to this Agreement.
8.8 Maintenance of Insurance. The Company and its Subsidiaries will
continue to carry its existing insurance through the Closing Date, and shall not
allow any breach, default or cancellation (other than expiration and replacement
of policies in the ordinary cause of business) of such insurance policies or
agreements to occur or exist. The Company shall also apply the proceeds, if any,
received under any insurance policy as a result of any loss or destruction of or
damage to any of its assets to the repair or replacement of such assets.
8.9 Resignation of Directors and Officers. The Company shall cause each
member of the Board of Directors and each officer of, and each trustee or
fiduciary of any plan or arrangement involving employee benefits of, the Company
or any of its Subsidiaries, if so requested by Purchaser, to tender his or her
resignation from such position effective as of the Closing Date.
8.10 Repayment of Debt. Prior to or at the Closing, the Company shall
pay or direct the Exchange Agent to pay (by the application of the Purchaser's
Closing Payment in accordance with Section 4.2) all principal of, interest on,
premium, if any, and other amounts, if any, owing to the lenders in respect of
Extinguished Debt as set forth in the Lender Pay-Off Letters, in accordance with
this Agreement and shall obtain the lenders' discharge and releases of all
obligations of the Company or any of its Subsidiaries relating to the
Extinguished Debt.
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8.11 Discharge of Liens, etc. Prior to or as of the Closing Date, the
Company shall cause all Liens under the existing Extinguished Debt agreements
and all other Liens other than Permitted Liens to be discharged and
extinguished.
8.12 State Takeover Laws. If any "fair price," "business combination"
or "control share acquisition" statute or other similar statute or regulation
shall become applicable to the transactions contemplated hereby, Purchaser and
the Company and their respective Boards of Directors shall use their reasonable
best efforts to grant such approvals and take such actions as are necessary so
that the transactions contemplated hereby and thereby may be consummated as
promptly as practicable on the terms contemplated hereby and thereby and
otherwise act to minimize the effects of any such statute or regulation on the
transactions contemplated hereby and thereby.
8.13 Vacation Accrual. On or prior to the Closing Date, the Company
will deliver to the Purchaser a schedule of setting for the name and total
amount of accrued vacation of each employee of the Company and its Subsidiaries.
8.14 Reserved.
8.15 Financial Statements. The Company agrees to provide to Purchaser
(i) upon completion thereof, the audited consolidated financial statements of
the Company and its Subsidiaries as of December 31, 1996, consisting of the
consolidated balance sheet at such date and the related consolidated statements
of income, retained earnings and cash flows for the twelve months then ended,
and (ii) as soon as practicable after the end of each calendar month until the
Closing Date, unaudited consolidated financial statements of the Company and its
Subsidiaries, consisting of a balance sheet as of the end of such month and an
income statement and statement of cash flows for that month and for the portion
of the year then ended.
8.16 Sandpiper Expansion. The Company will consult with Purchaser prior
to making any Sandpiper Expenditures as required by the definition of Sandpiper
Expenditures and will continue to consult with and allow Purchaser to monitor
the progress of all developments with respect to the Sandpiper Expansion.
8.17 Environmental Matters. The Company, at the Company's sole expense,
shall cause the environmental reports set forth on Schedule 6.15 (the "Phase I")
to be certified to the Purchaser and to Purchaser's lender.
8.18 Real Property. The Company and its Subsidiaries shall operate and
maintain the Real Property in the same manner as it has prior to the date
hereof.
53
8.19 Post-Closing Covenants. The Company, the Shareholders, the Resort
Holders and Purchaser agree as follows with respect to the period following the
Closing:
(a) In the event that certain Permits or Contracts are not transferable
or replacements therefor are not obtainable on or before the Closing, but such
Permits or Contracts are transferable or replacements therefor are obtainable
after the Closing, the Shareholders and the Resort Holders shall continue to use
such efforts in cooperation with Purchaser and the Surviving Corporation after
the Closing as may be required to obtain all required consents and approvals to
transfer, or obtain replacements for, such Permits and Contracts after Closing
and shall do all things necessary to give Purchaser and the Surviving
Corporation the benefits which would be obtained under such Permits and
Contracts.
(b) Reserved.
(c) In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other party hereto reasonably may
request, all at the sole cost and expense of the requesting party (unless the
requesting party is entitled to indemnification therefor under Section 12.1 or
Section 12.2). From and after the Closing, the Surviving Corporation will be
entitled to possession of all documents, books, records, agreements, and
financial data of any sort relating to the Company and its Subsidiaries.
(d) In the event and for so long as any party hereto actively is
contesting or defending against any charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand in connection with (i) any transaction
contemplated under this Agreement or (ii) any fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing Date involving
the Company or any of its Subsidiaries, each of the other parties hereto will
cooperate with him or it and his or its counsel in the contest or defense, make
available their personnel, and provide such testimony and access to their books
and records as shall be necessary in connection with the contest or defense, all
at the sole cost and expense of the contesting or defending party (unless the
contesting or defending party is entitled to indemnification therefor under
Section 12.1 or Section 12.2).
(e) The Surviving Corporation will distribute invoices consistent with
the Company's past collection practices to collect on all accounts receivable
and Long-term Receivables from and after the Closing Date and shall not modify
the terms of the Long-term Receivables without the consent of the
Representative. The Surviving Corporation will take all action requested by the
Representative to collect such Long-term Receivables, provided that the costs of
such action shall be borne by the Representative on behalf of the Shareholders
(other than De Minimis Shareholders) and Resort Holders and such action does not
unreasonably disrupt the business of the Surviving Corporation. The Surviving
Corporation agrees that it will sell such Long-term Receivables at the direction
of the Representative; provided that the
54
Representative provides the sale opportunity to the Surviving Corporation;
provided further, that the Surviving Corporation has no obligation in connection
with such transaction other than to deliver evidence of the Long-term
Receivables at the Closing. The Shareholders and Resort Holders acknowledge and
agree that all amounts collected with respect to the Long- term Receivables are
for the benefit of the Resort Holders and the Shareholders (other than De
Minimis Shareholders) who have all right to such amount and, subject to Section
8.19(h), the covenant contained in the Section 8.19(e) does not in any way or
manner restrict or limit the ability of the Surviving Corporation to manage and
operate its business, including its ability to terminate or otherwise modify the
Management Agreements, its agreements, Contracts or understandings with the
Innisbrook Condominium Association, Inc., the Tamarron Association of
Condominium Owners, Inc. or Hilton, and that any actions, omissions or
terminations in respect thereof, without regard to the Long-term Receivables.
(f) With respect to member golf tee times at Innisbrook, the Purchaser
will generally observe the evolved customs regarding member access to such tee
times consistent with past practices for the period from Closing through
December 31, 2001 which past practices provide generally for certain
accommodations with respect to tee times that may be pre- empted or rescheduled
by the Company or Resorts in the Event of conflicts or special events.
(g) Innisbrook Rental Pool Master Lease Agreement. Purchaser agrees
that the Surviving Corporation shall be bound by and shall perform and comply
with all terms and provisions of the Innisbrook Rental Pool Master Lease
Agreement last amended July 17, 1995 through the calendar year 2001 or so long
as such agreement is in existence under its present terms.
(h) Prior to December 2, 2000, the Surviving Corporation will not
terminate the Management Agreement with respect to the management and operation
of Tamarron other than as a result of a default thereunder on the part of
Hilton, unless either (A) the Surviving Corporation has used its reasonable best
efforts consistent with the best interests of the Company to enter into an
agreement to replace the Hilton flag at Tamarron with a successor hotel chain
approved by the Tamarron Association of Condominium Owners, Inc. or any of the
following flags: Hyatt Hotel, Lowes, Marriott, Sheraton, Ritz Carlton or Westin;
provided that the Company shall not be required to enter into a management
agreement on terms that are materially more burdensome to the Company than the
current Management Agreement with Hilton or (B) the Long-term Receivable from
the Tamarron Association of Condominium Owners, Inc. is not accelerated, reduced
or terminated as a result of the termination of such Management Agreement. In
addition, prior to December 2, 2000, the Surviving Corporation will not sell,
directly or indirectly, the Tamarron Resort unless the Purchaser, and its
successors and assigns, agrees to be bound by the covenant in this Section
8.19(h).
55
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS
OF PURCHASER
The obligations of Purchaser to effect the Merger and purchase the
Resort Shares at Closing under this Agreement are subject to the satisfaction or
waiver by Purchaser of the following conditions precedent on or before the
Closing Date:
9.1 Warranties True as of Both Present Date and Closing Date. The
representations and warranties of the Resort Holders in Article V and the
Company in Article VI herein shall have been accurate, true and correct on and
as of the date of this Agreement and shall also be accurate, true and correct on
and as of the Effective Time with the same force and effect as though made on
and as of the Effective Time.
9.2 Compliance with Agreements and Covenants. The Company and the
Resort Holders shall have performed and complied with all of the covenants,
obligations and agreements contained in this Agreement and the Related
Agreements to be performed and complied with by the Company or its Subsidiaries
on or prior to the Closing Date.
9.3 Required Consents. All material consents, authorizations and
approvals from, and all material declarations, filings and registrations with,
government agencies or third parties required to consummate the transactions
contemplated by this Agreement or the Related Agreements and permit the Company
and its Subsidiaries to continue their business consistent with prior practice
without a Material Adverse Effect shall have been obtained or made and delivered
to Purchaser, in form and substance to the reasonable satisfaction of Purchaser.
9.4 No Prohibition. No action or proceeding by any Authority shall have
been instituted or threatened that would enjoin, restrain or prohibit, or might
result in substantial Losses in respect of, this Agreement or the complete
consummation of the transactions as contemplated by this Agreement, or that
would, in the reasonable judgment of Purchaser, make it inadvisable to
consummate such transactions, and no court order shall have been entered in any
action or proceeding instituted by any party that enjoins, restrains or
prohibits this Agreement or the complete consummation of the transactions as
contemplated by this Agreement and the Related Agreements including, among other
things, the integration of the operation of the Company and its Subsidiaries
with those of Purchaser and its Affiliates.
9.5 Shareholder Approval. This Agreement and the Merger shall have been
approved by the requisite vote of Shareholders of the Company in accordance with
the applicable requirements of the BCA and the Articles of Incorporation and
By-Laws of the Company.
56
9.6 No Material Adverse Change. There shall not have occurred any
material adverse change (taken together with all other developments) since the
date of this Agreement in the business, operations, assets, results and
condition (financial and other) or prospects of the Company or its Subsidiaries.
9.7 Financial Statements; Financial Condition. (a) Reserved.
(b) The mix and composition of the assets and liabilities of the
Company and its Subsidiaries at the Closing Date will be substantially similar
to, and will not be different in any material respect, from such mix and
composition as represented in the Financial Statements at December 31, 1996;
(c) Since December 31, 1996, neither the Company nor any of its
Subsidiaries shall have incurred any Indebtedness not reflected in the Financial
Statements at December 31, 1996, except for Indebtedness incurred in accordance
with Section 8.2;
(d) Except as set forth in the Closing Determination under the caption
"Remaining Indebtedness," neither the Company nor any of its Subsidiaries shall
have any Indebtedness, including Indebtedness in respect of guaranties of the
Company or its Subsidiaries, at the Closing Date after giving effect to the
Lender Pay-Off Letters; and
(e) Since December 31, 1996, the Company and its Subsidiaries shall not
have modified or changed the timing or manner of payment of any invoices, bills
or other payables or obligations.
9.8 Reserved.
9.9 Repayment of Indebtedness; Discharge of Liens. Subject to the
deposit by Purchaser of the Purchaser's Closing Payment with the Exchange Agent,
the Company or the Exchange Agent on its behalf for the Purchaser, shall pay in
full all principal of, interest on, premium, if any, expenses and other amounts
owing to the lenders in respect of the Extinguished Debt as set forth in the
Lender Pay-Off Letters.
9.10 Reserved.
9.11 Liquor License. The Surviving Corporation, or the Surviving
Corporation's nominee, shall possess all liquor licenses, alcoholic beverage
licenses and other Permits and authorizations necessary to operate the
restaurant, bars, snack shops and lounges presently operated by the Company and
its Subsidiaries as a part of the Business.
9.12 Reserved.
9.13 Dissenting Shares. Holders of no more than two percent (2%) of the
outstanding Shares shall have elected to exercise dissenters' rights pursuant to
the BCA.
57
9.14 Title Commitment and Survey. Purchaser shall be able to obtain the
Title Commitment, committing to insure good and marketable fee simple title (or,
in the case of the Easement, good and marketable easement rights) to the Real
Property, subject to no exceptions other than Permitted Liens and other matters
which require the existence of the Survey in Purchaser's and Title Company's
discretion, and if available under applicable law, including the express
affirmative coverages listed below (either by the terms of the Title Commitment
or by endorsements thereto).
(a) Express coverage insuring over (a) liens for labor, services or
materials, whether or not of record; (b) the rights of parties in possession;
(c) unrecorded easements; (d) taxes or special assessments not shown by the
public record; and (e) exceptions that a current, accurate survey would
disclose, or if applicable, as otherwise set forth on the Survey;
(b) An ALTA endorsement insuring that there are no encroachments over
property lines or easements and that there are no violations of any covenants,
conditions or restrictions of record;
(c) Coverage insuring access, ingress and egress, and an endorsement
insuring that all utilities servicing the Real Property come through publicly
dedicated streets or valid, perpetual easements;
(d) A survey endorsement insuring that all parts of the improvements
are within lot lines and applicable setback lines, that the improvements do not
encroach onto adjoining land or on to any easements, that there are not
encroachments of improvements from adjoining land onto the Real Property, and
that all title exceptions locatable on a survey are located where shown (and
only where shown) on the Survey;
(e) If the legal description for the Real Property contains more than
one parcel, an endorsement insuring that such parcels are contiguous to one
another;
(f) An endorsement that the Real Property to be insured in the Title
Commitment is the same as that shown on (i) that certain Boundary Survey of the
Innisbrook Property dated October 10, 1995, prepared by Gerald P. Goulish
Engineering Inc. and (ii) that certain Boundary Survey of the Tamarron Property,
dated November 23, 1988, prepared by Golf Engineering;
(g) An endorsement insuring that the Real Property includes only the
tax parcel numbers listed on the Title Commitment and that none of such numbers
covers property other than the Real Property; and
(h) An endorsement insuring that the use and operation of the Real
Property is in compliance with all applicable zoning laws.
58
9.15 Documents. Purchaser shall have received in form and substance
satisfactory to it:
(a) A certificate, dated the Closing Date, of each of the Company and
the Resort Holders substantially to the effect set forth in Sections 9.1 and
9.2;
(b) Phase I certified to Purchaser and Purchaser's lender, dated within
six months of the Closing Date, with respect to the Real Property;
(c) The resignations of directors and the officers of the Company and
each of its Subsidiaries pursuant to Section 8.9, effective as of the Effective
Time;
(d) The Articles of Incorporation of the Company certified by the
Secretary of State the State of Florida, the By-laws of the Company and the
resolutions of the Board of Directors and the Shareholders of the Company
authorizing the execution and delivery of this Agreement, the Related Agreements
and the transactions contemplated hereby or thereby, certified by the secretary,
assistant secretary or equivalent Person of the Company;
(e) Certificate of Good Standing for the Company from the Secretary of
State of the State of Florida and from all jurisdictions in which the Company is
qualified to do business;
(f) An opinion dated the Closing Date, of Foley & Lardner, counsel for
the Company, in form and substance satisfactory to Purchaser addressing the
legal matters set forth in Sections 6.1(a), (b), (c) and (e), 6.6, 6.8 and 6.17;
(g) The Articles of Incorporation of each of the Company's Subsidiaries
certified by the Secretary of State of the state of such Subsidiary's
jurisdiction and the By-laws of each Subsidiary certified by the secretary,
assistant secretary or equivalent Person of each Subsidiary;
(h) Certificate of Good Standing for each of the Company's Subsidiaries
from the Secretary of State of the state of the Subsidiary's incorporation and
from all jurisdictions in which the Subsidiary is qualified to do business;
(i) Certificates evidencing all of the Resort Shares, which
certificates shall be duly endorsed in blank or accompanied by duly executed
stock powers assigning them to Purchaser;
(j) Extinguished Debt Certificates;
(k) Lender Pay-Off Letters;
(l) Transaction Fee Pay-Off Letters;
59
(m) Transaction Fee Certificate;
(n) Title Commitment;
(o) Reserved;
(p) As of the Closing Date, all conditions necessary for the
effectiveness of the Development shall have been satisfied or waived in writing
by the parties to the Development Agreement and a recorded copy of the
memorandum relating to the Development Agreement shall have been recorded;
(q) All documents necessary to evidence, in Purchaser's discretion,
that Pinellas County and Wall Springs Conservatory, Inc. have entered into an
agreement regarding an exchange of land as set forth in the Development
Agreement;
(r) A recorded copy of the First Amendment, together with title
insurance insuring the Company's marketable title to the Easement Parcel free
and clear of all Liens and encumbrances that can be satisfied by the payment of
a definite and ascertainable monetary amount (excluding the Construction Loan).
Should the Company or any of its Subsidiaries elect to close on the Construction
Loan, the Company shall notify Purchaser of the same and shall be responsible
for all costs associated with such closing, including, without limitation,
attorney's fees, recording costs, title costs and bank fees and the Purchaser's
Closing Payment shall be adjusted such that all if such costs shall be deemed
not to be a documented Sandpiper Expenditure as set forth in Section 4.2(a)
hereof);
(s) Reserved.
(t) An opinion of water counsel and a report of a water engineer each
in form and substance acceptable to Purchaser dated the Closing Date, each
selected by Purchaser, at the sole cost and expense of the Company addressed to
Purchaser and Purchaser's lender (which cost shall not exceed $25,000), stating
that the water rights of the Company are materially
60
the same as the Water Rights set forth on Schedule 6.8 and that such Water
Rights have been and currently are adequate to meet the obligations set forth in
the Water Agreements and have been and currently are sufficient to operate the
golf course at the Tamarron Resort in the ordinary course of business and, with
respect to the water engineer's report, that there are no material defects or
inadequacies with respect to the water and wastewater facilities and related
water needs at the Tamarron Resort;
(u) Structural engineering reports and reliance letters for Purchaser's
lender ("Engineering Reports"), by an engineer selected by the Purchaser, at the
sole cost and expense of the Company (which cost shall not exceed $27,100), in
form and substance reasonably acceptable to Purchaser.
(v) An opinion dated the Closing Date, of Shand, Newbold & Chapman,
Colorado local counsel to the Company, in the form and substance of the draft
dated April 24, 1997 delivered to the Purchaser prior to the date hereof; and
(w) Such other documents reasonably requested by Purchaser.
9.16 Litigation. There shall exist no actual, pending or threatened
litigation which the Purchaser reasonably believes could affect the terms of
this Agreement or the consummation of the transactions contemplated hereby.
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE COMPANY AND THE RESORT HOLDERS
The obligations of the Company and the Resort Holders at Closing under
this Agreement are subject to the satisfaction or waiver by Company of the
following conditions precedent on or before the Closing Date:
10.1 Warranties True as of Both Present Date and Closing Date. The
representations and warranties of Purchaser contained in Article VII herein
shall have been accurate, true and correct on and as of the date of this
Agreement and as of the Closing Date, in all material respects.
10.2 Compliance with Agreements and Covenants. Purchaser shall have
performed and complied with all of its covenants, obligations and agreements
contained in this Agreement to be performed and complied with by it on or prior
to the Closing Date, in all material respects.
61
10.3 No Prohibition. No action or proceeding by any Authority shall
have been instituted or threatened which would enjoin, restrain or prohibit, or
might result in substantial damages in respect of, this Agreement or the
complete consummation of the transactions as contemplated by this Agreement, and
which would, in the reasonable judgment of the Representative, make it
inadvisable to consummate such transactions, and no court order shall have been
entered in any action or proceeding instituted by any party which enjoins,
restrains, or prohibits this Agreement or the complete consummation of the
transactions as contemplated by this Agreement.
10.4 Documents. The Company shall have received, in form and substance
satisfactory to it:
(a) A certificate, dated the Closing Date, of Purchaser substantially
to the effect set forth in Sections 10.1 and 10.2 (the "Purchaser Closing
Certificate");
(b) The Articles of Incorporation of Purchaser certified by the
Secretary of the State of Florida, the By-laws of Purchaser and the resolutions
of the Board of Directors and shareholders of Purchaser authorizing the
execution and delivery of this Agreement, the Related Agreements and the Merger
and the other transactions contemplated hereby and thereby, certified by the
secretary, assistant secretary or equivalent Person of Purchaser;
(c) A Certificate of Good Standing for Purchaser from the Secretary of
State of Florida;
(d) An opinion, dated the Closing Date, of Mayer, Brown & Platt,
counsel for Purchaser, in form and substance satisfactory to the Company as to
the legal matters set forth in Sections 7.1, 7.2 and 7.3; and
(e) Such other documents reasonably requested by the Company.
(f) A term promissory note, in a form reasonably acceptable to the
Company and the Resort Holders, setting forth the terms upon which the Surviving
Corporation will repay any and all amounts loaned to the Surviving Corporation
by the Escrow Agent (the "Escrow Note").
(g) A mortgage and security agreement, in a form reasonably acceptable
to the Company and the Resort Holders, securing the Surviving Corporation's
obligations under the Escrow Note.
(h) Copies of any and all mortgages, each of which is in form
reasonably acceptable to the Company and the Representative to ensure that its
security interest in the real property that constitutes the Tamarron Resort is
senior to any other indebtedness in excess of $250,000 secured by the real
property which constitutes the Tamarron Resort, which purport
62
to create a mortgage, lien or other encumbrance on all or any part of the real
property that constitutes the Tamarron Resort.
ARTICLE XI
TERMINATION
11.1 Termination. This Agreement may be terminated at any time on or
prior to the Closing Date:
(a) With the mutual consent of the Company and Purchaser;
(b) By written notice from the Company or Purchaser to the other, if
the Closing shall not have taken place on or before June 30, 1997; provided,
however, that the right to terminate this Agreement under this Section 11.1(b)
shall not be available to any party whose failure to perform any obligation
under this Agreement has been the cause of or resulted in the failure of the
Closing to occur on or before such date; provided further, that if the Closing
shall not have taken place on or before June 30, 1997, as a result of the
failure of the conditions precedent contained in Sections 9.5, 9.13 or 9.16 to
be satisfied or any other reason relating to the Shareholders, the Resort
Holders or Hilton, neither the Company nor the Purchaser shall have a right to
terminate this Agreement pursuant to this Section 11.1(b) until August 29, 1997;
(c) By Purchaser, if there shall have been a material breach of any
covenant, representation or warranty of Company or the Company hereunder, and
such breach shall not have been remedied within thirty (30) business days after
receipt by the Company of a notice in writing from Purchaser specifying the
breach and requesting such be remedied;
(d) By the Company, if there shall have been a material breach of any
covenant, representation or warranty of Purchaser hereunder, and such breach
shall not have been remedied within thirty (30) business days after receipt by
Purchaser of notice in writing from the Company specifying the breach and
requesting such be remedied;
(e) By written notice from the Company or Purchaser to the other, if
any court of competent jurisdiction or other governmental body shall have issued
an order, decree or ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement or the Related Agreements and such order, decree, ruling or other
action shall have become final and nonappealable;
(f) By Purchaser if the Shareholders of the Company do not approve the
Merger at the Special Shareholders Meeting or at any adjournment or postponement
thereof;
63
(g) By Purchaser if the Board of Directors of the Company shall not
have recommended, or shall have resolved not to recommend, or shall have
modified or withdrawn its recommendation of the Merger or declaration that the
Merger is advisable and fair to and in the best interest of the Company and its
Shareholders, or shall have resolved to do so;
(h) By Purchaser or the Company, if Purchaser shall not have deposited
the Deposit Amount with the Escrow Agent in accordance with the requirements of
Section 8.5; provided that the right to terminate this Agreement pursuant to
this Section 11.1(h) shall expire 5 business days after the date on which the
Deposit Amount is required to be paid pursuant to Section 8.5; and
(i) By Purchaser pursuant to Section 8.7.
11.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 11.1(a), 11.1(b) or 11.1(e) or all obligations of the parties hereunder
(except for the obligations set forth in Section 13.1, which shall survive the
termination of this Agreement) shall terminate without liability of any party
(or any shareholder, Affiliate, director, officer, employee, agent, consultant
or representative of any party). If this Agreement is terminated by the Company
or the Purchaser pursuant to Section 11.1(h), all obligations of the parties
hereunder (except for the obligations set forth in Section 13.1, which shall
survive the termination of this Agreement) shall terminate without liability of
any party (or any shareholder, Affiliate, director, officer, employee, agent,
consultant or representative of any party); provided, however, that the
Purchaser shall be liable (i) to pay $52,100 to the Company as reimbursement for
the expenses incurred by the Company with respect to the matters set forth in
Section 9.15(t) and Section 9.15(u), and (ii) to remove any Liens encumbering
any Real Property resulting from (A) the preparation of the Survey or (B) the
matters set forth in Section 9.15(t) and Section 9.15(u). If this Agreement is
terminated pursuant to Section 11.1(a), 11.1(b), 11.1(c), 11.1(e), 11.1(f),
11.1(g) or 11.1(i), Purchaser shall be entitled to the return of the Deposit
Amount and such termination will be without liability on the part of Purchaser
or its shareholders, Affiliates, directors, officers, employees, agents,
consultants or representatives. If this Agreement is terminated pursuant to
Section 11.1(d), the Company shall be entitled, as its sole remedy, to the
Deposit Amount as full and complete liquidated damages and the Company and each
of its Subsidiaries shall fully release Purchaser, its shareholders, Affiliates,
directors, officers, employees, agents, consultants, and representatives from
any and all liability other than the return of the Deposit Amount. Retention by
the Company of the Deposit Amount as liquidated damages is not intended as a
forfeiture or penalty, but instead, is intended to constitute liquidated damages
the Company and its Subsidiaries. Due to the special nature of the negotiations
which preceded acceptance by the Company of Purchaser's offer to proceed under
this Agreement of Merger, the parties acknowledge that the actual damage which
would result the Company and its Subsidiaries as a result of Purchaser's default
under the terms of this Agreement of Merger would be extremely difficult to
establish. In addition, Purchaser desires to have a limitation put on
Purchaser's potential liability the Company and its Subsidiaries in the event
64
that this transaction shall fail to close. Therefore, in order to induce the
Company to accept Purchaser's offer on the terms set forth herein, instead of
terms more favorable to the Company, or instead of a competing offer from
another party, Purchaser has proposed and the Company has accepted the concept
of liquidated damages as set forth herein with the retention by the Company of
the Deposit Amount having been the subject of considerable negotiation between
the parties. In any case, the Deposit Amount shall be promptly, and in any event
within five business days, paid to the entitled party by the Escrow Agent. No
termination pursuant to Section 11.1(c), or 11.1(d) shall relieve any party from
liability for any willful breach of this Agreement prior to such termination,
and the willfully breaching party shall be fully liable for any and all Losses
sustained or incurred by any other party from such breach; provided that
Purchaser's aggregate liability will be limited to the Deposit Amount; and,
provided further, in the event this Agreement is terminated prior to the Closing
by the Purchaser pursuant to Section 11.1(c) as a result of a nonwillful breach
on the part of the Company or the Resort Holders, the aggregate liability of the
Company and the Resort Holders will be limited to $1,000,000.
ARTICLE XII
SURVIVAL AND REMEDY; INDEMNIFICATION
12.1 Survival. All of the terms and conditions of this Agreement,
together with the warranties, representations, agreements and covenants
contained herein or in any instrument or document delivered or to be delivered
pursuant to this Agreement, shall survive the execution of this Agreement and
the Closing Date, notwithstanding any investigation heretofore or hereafter made
by or on behalf of any party hereto; provided, however, that (a) the agreements
and covenants of Shareholders set forth in the Shareholders Consents and the
Letters of Transmittal shall survive and continue until all obligations set
forth therein shall have been performed and satisfied and the applicable statute
of limitations for breaches or defaults of such agreements and covenants has
expired; (b) the agreements and covenants (other than the indemnification
provisions set forth in this Article XII, which will survive as provided below)
set forth in this Agreement shall survive and continue until all obligations set
forth therein shall have been performed and satisfied and the applicable statute
of limitations for breaches or defaults of such agreements and covenants has
expired; and (c) all representations and warranties, and the related agreements
of the Company and its Subsidiaries, the Resort Holders, the Shareholders and
Purchaser to indemnify each other set forth in this Article XII, shall survive
and continue for, and all indemnification claims with respect thereto shall be
made prior to the end of, three years from the Closing Date, except for (i) the
representations and warranties of the Resort Holders and the Shareholders as to
title to the Resort Shares or Shares contained in this Agreement, the
Shareholders Consents or the Letters of Transmittal, which shall survive without
limitation, (ii) the representations and warranties of the Company set forth in
Section 6.14 [Taxes], which shall survive until 90 days after the expiration of
the applicable statute of limitations, (iii) indemnification claims with respect
to alleged breaches or inaccuracies pursuant to Section 12.2(i) which shall
65
survive only until delivery to the Surviving Corporation of its audited
financial statements for the year ending December 31, 1998, and (iv)
representations, warranties and related indemnities for which an indemnification
claim shall be pending as of the end of the applicable period referred to above,
in which event such indemnities shall survive with respect to such
indemnification claim until the final disposition thereof (the "Indemnification
Period").
12.2 Indemnification by the Company, the Resort Holders and the
Shareholders. Each of the Company, the Resort Holders and the Shareholders agree
to indemnify on an actual after-tax basis Purchaser, the Surviving Corporation
and each of their respective officers, directors, shareholders, employees and
agents, against, and agree to hold them harmless from, any and all Losses
incurred or suffered by Purchaser or any of the foregoing persons (or any
combination thereof) arising out of any of the following: (i) any breach or
material alleged breach resulting from a third party claim of or any inaccuracy
or material alleged inaccuracy resulting from a third party claim in any
representation or warranty made by the Company, the Resort Holders or the
Shareholders pursuant to this Agreement, or any Related Agreement, any
agreement, or instrument contemplated hereby, (including, without limitation,
the insurance of any survey or legal description which currently exists for the
Real Property or for any matters disclosed on the Survey (to be delivered by the
Company to the Surviving Corporation within six (6) months of the date hereof)
that adversely affect the Real Property), any document relating hereto or
thereto or contained in any exhibit or schedule to this Agreement; (ii) any
breach of or failure by the Company or any Resort Holders or any Shareholders to
perform any covenant, agreement or obligation required by this Agreement, or any
other instrument contemplated hereby, any document relating hereto or thereto or
contained in any exhibit or schedule to this Agreement; (iii) any claims by or
liabilities with respect to any employee of the Company or its Subsidiaries with
respect to his or her employment or termination of employment on or prior to the
Closing Date by the Company or any of its Subsidiaries, including, without
limitation, any and all worker's compensation claims or liabilities arising out
of any accidents, illness or other events which occurred on or prior to the
Closing Date; (iv) any Environmental Liabilities and Costs or Remedial Action
relating to the business and activities or the operation by the Company or any
of its Subsidiaries of facilities in respect of any periods prior to the
Closing; (v) any claims by or liabilities with respect to any Shareholder,
including those related to a claim for "fair value" under the BCA or any other
applicable law or regulation, that arise out of or in connection with the
transaction contemplated by this Agreement and the consideration paid hereunder
or received by the Shareholder pursuant to this Agreement or the Exchange
Agreement, provided that indemnification under this Section 12.2(v), with
respect to claims for "fair value" by holders of Dissenting Shares, shall be
limited to the amount by which any Losses with respect to any holder of
Dissenting Shares exceeds the amount of Merger Consideration paid or payable to
such holder; (vi) any claim by Hilton or liabilities with respect to the
Management Agreement that arise from actions or activities taken on or prior to
the Closing Date or that arise from the transaction contemplated by this
Agreement; (vii) all vacation pay or pay for other compensated absences earned
or accrued by the employees as of the close of business on the Closing Date to
the extent not fully reserved on
66
the Financial Statements and reflected in the Final Determination; (viii) all
other obligations arising with respect to employees of the Company or any of its
Subsidiaries, including all severance payments and other amounts due to such
employees as a result of or in connection with the termination of their
employment with the Company or any of its Subsidiaries, including all payments
pursuant to Regulation, law, Contract or other agreement or arrangement;
provided, that such employee is terminated on or prior to the forty-fifth day
after the Closing Date and provided, further that the Surviving Corporation
shall be responsible for the payment of severance obligations for employees
terminated after the Closing Date to the extent that such obligation shall not
exceed the payment of more than two weeks salary; (ix) the litigation matters
referred to on Schedule 6.17; (x) all Taxes that relate to periods prior to the
Closing Date and (xi) all demands, assessments, judgements, costs and reasonable
legal and other expenses arising from, or in connection with, any investigation,
action, suit, proceeding or other claim incident to any of the foregoing in this
Agreement; provided that, with respect to claims among the parties hereto that
do not involve a third-party claim, Purchaser is entitled to indemnification
with respect to the underlying investigation, action, suit, proceeding or other
claim pursuant to this Agreement. The parties hereto agree that (i) Purchaser
and the Surviving Corporation shall not be entitled to indemnification pursuant
to Section 12.2 for amounts which, in the aggregate, exceed the Escrow Amount;
(ii) any indemnification pursuant to this Section 12.2 shall be provided by the
Escrow Account and (iii) the Company shall have no obligation to indemnify the
Purchaser for Losses arising out of any breach of or any inaccuracy in any
representation or warranty made by the Resort Holders or any breach of or
failure by the Resort Holders to perform any covenant, agreement or obligation
pursuant to this Agreement to the extent such indemnification would be a breach
of the fiduciary duties of the Company.
12.3 Indemnification by Purchaser and the Surviving Corporation.
Purchaser and the Surviving Corporation agree to indemnify the Resort Holders
and the Shareholders against, and agree to hold them harmless from, any and all
Losses incurred or suffered by the Resort Holders or the Shareholders or any of
the foregoing persons (or any combination thereof) arising out of (i) any breach
of or any inaccuracy in any representation or warranty made by Purchaser
pursuant to this Agreement or any Related Agreement, any agreement, or
instrument contemplated hereby, any document relating hereto or thereto or
contained in any exhibit or schedule to this Agreement; (ii) any breach of or
failure by Purchaser to perform any agreement, covenant or obligation of
Purchaser set out in this Agreement or any Related Agreement, any agreement, or
instrument contemplated hereby, any document relating hereto or thereto or
contained in any exhibit or schedule to this Agreement occurring after the
Closing Date; and (iii) any acts or omissions by the Surviving Corporation and
any obligations and liabilities in respect of the Surviving Corporation from and
after the Closing Date; (iv) any Environmental Liabilities and Costs relating to
the business and activities or the operation by the Surviving Corporation of
facilities in respect of any periods after the Closing; and (v) all demands,
assessments, judgements, costs and reasonable legal and other expenses arising
from, or in connection with, any investigation, action, suit, proceeding or
other claim incident to any of the foregoing in this Agreement; provided that
the Resort
67
Holders or the Shareholders are entitled to indemnification with respect to the
underlying investigation, action, suit, proceeding or other claim pursuant to
this Agreement.
12.4 Third-Party Claims. Except as otherwise provided in this
Agreement, the following procedures shall be applicable with respect to
indemnification pursuant to this Article XII relating to or arising out of
claims, actions or omissions by Authorities, or other third parties. Promptly
after receipt by the party seeking indemnification hereunder (hereinafter the
"indemnitee") of notice of the commencement of any (a) tax audit or proceeding
for the assessment of any Tax by any taxing authority or any other proceeding
likely to result in the imposition of a liability or obligation for Taxes or (b)
any action or the assertion of any claim, liability or obligation by an
authority or a third party (whether by legal process or otherwise), against
which claim, liability or obligation a party under this Article XII (hereinafter
the "indemnitor") that is, or may be, required under this Agreement to indemnify
such indemnitee, the indemnitee will, if a claim thereon is to be, or may be,
made against the indemnitor pursuant to this Article XII, notify the indemnitor
in writing of the commencement or assertion thereof and give the indemnitor a
copy of such claim, process and all legal pleadings and other written evidence
thereof. The indemnitor shall have, in all instances, the right to participate
in the defense of such action with counsel of reputable standing. The indemnitor
shall have the right to assume the defense of such action unless such action (a)
may result in orders, injunctions or other equitable remedies in respect of the
indemnitee or its business; or (b) may result in liabilities which, taken with
other then existing claims under this Article XII, would not be fully
indemnified hereunder. The indemnitor shall have 10 days, after receipt of
notice of such claim, process, legal proceeding and other written notice, to
assume the defense thereof. If the indemnitor does assume such defense, it will,
within such 10 days, so notify the indemnitee. If the indemnitor does not assume
such defense and so notify the indemnitee, or if the indemnitor is barred from
assuming such defense pursuant to this Section 12.4, then the indemnitee shall
assume such defense, subject to the participation of the indemnitor, as provided
in this Section 12.4, and the indemnitee's fees and expenses (including fees and
expenses of counsel) in connection with such defense will be borne by the
indemnitor. In any case, the indemnitor and indemnitee shall cooperate and
assist each other in such defense, and shall make available to the other all
records, documents and information (written or otherwise) relevant to such
defense. If the indemnitee shall be required by judgment or a settlement
agreement to pay any amount in respect of any obligation or liability against
which the indemnitor has agreed to indemnify the indemnitee under this
Agreement, the indemnitee shall make a claim with the Escrow Agent for such
amount (which shall include all reasonable legal fees and documented expenses
related thereto) to be withdrawn from the Escrow Account in accordance with the
terms and provisions of the Escrow Agreement, subject to this Article XII. An
indemnitor or indemnitee shall have the authority to settle or compromise any
claim for which it has assumed or conducted the defense pursuant to this Section
12.4; provided, that an indemnitor shall not settle or compromise any such claim
if such settlement or compromise would result in an order, injunction or other
equitable remedy in respect of the indemnitee or the Company, would result in
liabilities which, taken together with other existing claims under this Article
XII, would not be fully indemnified hereunder
68
or would have a material adverse effect on the indemnitee; in each case, without
the prior written consent of the indemnitee, which consent will not be
unreasonably withheld. An indemnitee shall have the right to employ its own
counsel in any case, but the fees and expenses of such counsel shall be at the
expense of the indemnitee, unless (x) the employment of such counsel shall have
been authorized in writing by the indemnitor in connection with the defense of
such action or claim, (y) the indemnitor shall not have assumed the defense, or
shall be barred from assuming the defense, of such action or claim pursuant to
this Section 12.4, or (z) such indemnitee shall have reasonably concluded that
there may be defenses available to it which are contrary to, or inconsistent
with, those available to the indemnitor, in any of which events such fees and
expenses of not more than one additional counsel for the indemnified parties
shall be borne by the indemnitor, in accordance with this Section 12.4.
In the event that the Escrow Account is the provider of indemnification
or in the event that the indemnitor shall have the right to assume defense of a
claim pursuant this Section or is required to pay the legal fees and expenses of
the indemnitee, all such reasonable fees and expenses in connection with the
defense of such claim shall be advanced from the Escrow Account, in accordance
with the Escrow Agreement and Purchaser and any indemnitee shall execute any
joint written notice to the applicable Escrow Agent and otherwise to cooperate
with the other in obtaining such advance or advances of funds.
12.5 Purchaser-Resort Holder-Shareholder Claims. In the event that any
indemnitee believes that it is entitled to claim indemnification from an
indemnitor under this Article XII, the indemnitee shall notify the indemnitor of
such claim, the amount or estimated amount thereof and the basis for such claim
(which will be described in reasonable detail). The indemnitor, on the one hand,
and the indemnitee, on the other hand, will proceed, in good faith, and using
reasonable efforts, to agree on the amount of such indemnification claim. If
they are unable to agree on the amount of such indemnification claim within 30
days after such notice, then the indemnification claim will be submitted to
arbitration conducted pursuant to the rules and procedures of the American
Arbitration Association. The determination of the amount of any indemnification
claim pursuant to this Section 12.5 will be final, binding and conclusive, and
the indemnitee, upon final determination of the amount of the indemnification
claim will be paid, by the indemnitor, within 10 days of such final
determination, the full amount, in cash, of such indemnification claim, as
finally determined, and will be entitled to apply to any court or authority of
competent jurisdiction to enforce such payment (the fees and expenses of such
enforcement, if necessary, to be borne by the indemnitor subject to the
provisions of this Article XII, if applicable).
12.6 Indemnification Limits. (a) Indemnification claims shall be
reduced, by and to the extent, that (i) an indemnitee shall actually receive
proceeds under insurance policies, risk sharing pools, or similar arrangements
specifically as a result of, and in compensation for, the subject matter of an
indemnification claim by such indemnitee; provided, however, that
indemnification claims shall not be reduced by tax benefits, if any, and (ii)
with respect to
69
claims against the Company, to the extent reserved and reflected on the balance
sheet of the Company as of the Closing Date and reflected in Net Value.
(b) Purchaser shall not be entitled to indemnification pursuant to
Section 12.2 and the Resort Holders and the Shareholders shall not be entitled
to indemnification pursuant to Section 12.3 with respect to any breach or
misrepresentation of any representation or warranty until such time as such
party's respective aggregate right to such indemnification exceeds $150,000
after which threshold is reached, Purchaser and the Surviving Corporation, or
the Resort Holders and the Shareholders, will be entitled to such
indemnification for the total amount without regard to such threshold. Purchaser
and the Surviving Corporation shall be entitled to indemnification pursuant to
Section 12.2 with respect to any Losses in connection with claims by holders of
Dissenting Shares and title to Shares and Resort Shares without regard to any
threshold. Shareholders and Resort Holders shall not be entitled to
indemnification pursuant to Section 12.3 for amounts in excess of the Merger
Consideration and/or Resort Proceeds, respectively, which such holder was
entitled to pursuant to Article III or Section 4.2. Purchaser's Closing Payments
adjustments pursuant to Section 4.3 shall not be subject to this Section
12.6(b). From and after the Closing Date, Purchaser and the Surviving
Corporation shall not be entitled to indemnification pursuant to Section 12.2
for amounts which, in the aggregate, exceed the Escrow Amount. From and after
the Closing Date, Shareholders and Resort Holders shall be jointly and severally
liable for indemnification pursuant to Section 12.2; provided, however, that the
liability of the Company, the Shareholders and the Resort Holders for
indemnification with respect to claims arising prior to the Closing Date shall
be several and not joint.
ARTICLE XIII
MISCELLANEOUS
13.1 Expenses. Each party hereto shall bear its own expenses (including
legal fees and expenses) with respect to this Agreement, the Related Agreements
and the transactions contemplated hereby and thereby. Expenses of the Company
and its Subsidiaries, the Resort Holders and the Shareholders (including legal
fees and expenses of counsel to the Company and its Subsidiaries and the holders
of the Shares) shall be paid by the Company. All expenses to be paid by the
Company shall be paid on the Closing Date in accordance with Section 4.2(c).
13.2 Amendment. This Agreement may be amended, modified or supplemented
but only in writing signed by Purchaser and the Company.
13.3 Notices. Any notice, request, instruction or other document to be
given hereunder by a party hereto shall be in writing and shall be deemed to
have been given, (a) when received if given in person or by courier or a courier
service, (b) on the date of transmission if sent by telex, facsimile or other
wire transmission, (c) on the business day
70
after deposit with a reputable overnight delivery service or (d) three business
days after being deposited in the U.S. mail, certified or registered mail,
postage prepaid:
(a) If to the Company prior to the Closing Date, addressed as follows:
Golf Hosts, Inc.
36750 U.S. Highway 19 North
Palm Harbor, Florida 34684
Attention: Stanley D. Wadsworth
Facsimile No.: (813) 942-5579
with a copy to:
Foley & Lardner
100 North Tampa Street
Suite 2700
Tampa, Florida
Attention: Lewis H. Hill III
Facsimile No.: (813) 221-4210
(b) If to the Resort Holders or the Representative, addressed as
follows:
Stanley D. Wadsworth
4418 Highway 160 West
Hesperus, Colorado 81326
Facsimile No.: (970) 533-1297
with a copy to:
Foley & Lardner
100 North Tampa Street
Suite 2700
Tampa, Florida
Attention: Lewis H. Hill III
Facsimile No.: (813) 221-4210
71
(c) If to Purchaser, addressed as follows:
c/o Starwood Capital Group
Three Pickwick Plaza
Suite 250
Greenwich, Connecticut 06830
Attention: Merrick R. Kleeman
Facsimile No.: (203) 861-2100
with a copy to:
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
Attention: James B. Carlson
Facsimile No.: (212) 262-1910
(d) If to the Surviving Corporation, addressed as follows:
Golf Hosts, Inc.
36750 U.S. Highway 19 North
Palm Harbor, Florida 34684
Attention: President
Facsimile No.: (813) 942-5579
with copies to:
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
Attention: James B. Carlson
Facsimile No.: (212) 262-1910
Starwood Capital Group
Three Pickwick Plaza
Suite 250
Greenwich, Connecticut 06830
Attention: Merrick R. Kleeman
Facsimile No.: (203) 861-2100
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
72
13.4 Representative. (a) Notwithstanding any statement to the contrary
contained herein, the Company and each Resort Holder and each Shareholder
irrevocably authorizes and appoints Stanley D. Wadsworth or his successor
appointed pursuant to this Section 13.4 (the "Representative") as its true and
lawful attorney and representative with full power and authority to take any and
all actions and execute any and all documents and agreements in the Company or
such Resort Holder's or Shareholders' name, place and stead, with the same
effect as if such action were taken or such document or agreement were executed
by the Company or such Resort Holder or Shareholder, in connection with any
matter or thing relating to this Agreement, any Related Agreement or any of the
transactions contemplated hereby or thereby, including (without limitation) (i)
to negotiate and settle any claim for indemnification by Purchaser or the
Surviving Corporation against the Company, any Resort Holder or any Shareholder,
(ii) to accept any funds on behalf of the Company, any Resort Holder or any
Shareholder, (iii) to enter into amendments of this Agreement and the Related
Agreements, (iv) to set aside funds under the Exchange Agent Agreement and to
utilize such funds to pay (A) obligations of the Company and/or Resort relating
to liabilities incurred prior to the Closing Date which are not reflected in the
Net Value or not otherwise the responsibility of the Purchaser hereunder and (B)
other expenses incurred or paid by the Representative and the former directors
of the Company in connection with the consummation of the transactions
contemplated hereby, and (v) to make the determinations and payments described
in Article III. Stanley D. Wadsworth hereby accepts his appointment as the
Representative and agrees to perform all of the duties of the Representative
hereunder. The appointment shall terminate with respect to the Company at the
Closing.
(b) The Representative cannot resign or be removed by the Resort
Holders, the Shareholders or the Company, respectively, except upon delivery to
Purchaser or the Surviving Corporation of a written instrument signed by the
successor Representative and by the Company, the Resort Holders or the
Shareholders (or their successors in interest) having a majority of the Resort
Shares or Shares, as the case may be, in which the successor Representative
agrees to serve as Representative and the Company or said Resort Holders or
Shareholders consent thereto (such instrument being referred to as a
"Representative Replacement Instrument").
(c) The signature of the Representative on behalf of the Company, the
Resort Holders or Shareholders shall be deemed to be the signature of the
Company or each of the Resort Holders or Shareholders, as the case may be, and
they shall be bound by the terms of any documents and agreements executed and
delivered by the Representative pursuant to this Agreement as though they were
actual signatories thereto. Purchaser shall be entitled to rely, without any
investigation or inquiry by Purchaser, upon all action by the Representative as
having been taken upon the authority of the Company, the Resort Holders or the
Shareholders. Any action by the Representative taken on behalf of the Company,
the Resort Holders or a Shareholder shall be conclusively deemed to be the
action of the Company, such Resort Holder or such Shareholder, and Purchaser
shall not have any liability or
73
responsibility to the Company, any Resort Holder or any Shareholder for any
action taken in reliance thereon.
(d) The Resort Holders and the Shareholders hereby agree to bear the
reasonable charges of the Representative, including reimbursement for
out-of-pocket expenses and other costs, and such attorneys' fees, expenses and
other costs as may be incurred by Representative in connection with the
administration of the provisions of this Agreement. The Representative shall
have the right to direct the Exchange Agent to set aside and hold a portion of
the funds held by the Exchange Agent pursuant to the Exchange Agent Agreement to
provide for the aforementioned reimbursement and/or the matters described in
Section 13.4(a).
(e) Notwithstanding anything herein to the contrary, the Representative
shall not be obligated to inquire as to the form, execution, sufficiency or
validity of any such instruments or agreements or the identity or authority or
offices of the persons executing and delivering the same. The Representative
shall not be liable to any party hereto for any act which he may do or omit to
do hereunder in good faith, and the Resort Holders and the Shareholders hereby
covenant and agree, severally, forever to save, hold and keep the Representative
harmless from any liability or claims (including attorneys' fees, court costs
and arbitration costs) suffered or incurred, directly or indirectly, in
connection with this Agreement; provided, however, that the Representative shall
be fully responsible for any and all acts of willful misconduct or fraud on the
part of the Representative.
13.5 Waivers. The failure of a party hereto at any time or times to
require performance of any provision hereof shall in no manner affect its right
at a later time to enforce the same. No waiver by a party of any condition or of
any breach of any term, covenant, representation or warranty contained in this
Agreement shall be effective unless in writing, and no waiver in any one or more
instances shall be deemed to be a further or continuing waiver of any such
condition or breach in other instances or a waiver of any other condition or
breach of any other term, covenant, representation or warranty.
13.6 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
13.7 Interpretation. The headings preceding the text of Articles and
Sections included in this Agreement and the headings to Sections of the
Disclosure Schedule are for convenience only and shall not be deemed part of
this Agreement or the Disclosure Schedule or be given any effect in interpreting
this Agreement or the Disclosure Schedule. The use of the terms "including" or
"include" shall in all cases herein mean "including, without limitation" or
"include, without limitation," respectively.
13.8 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE INTERNAL
74
LAWS OF THE STATE OF FLORIDA WITHOUT GIVING EFFECT TO THE PRINCIPLES OF
CONFLICTS OF LAW THEREOF.
13.9 Binding Agreement. This Agreement and the Related Agreements shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. Copies of original signatures sent by
facsimile transmission shall be binding as if an original. No Shareholder or
Resort Holder may assign its rights or obligations under this Agreement except
by operation of law.
13.10 No Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto and no provision of this Agreement shall be deemed
to confer upon third parties any remedy, claim, liability, reimbursement, cause
of action or other right.
13.11 Enforcement of this Agreement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
13.12 Publicity. Prior to the Closing Date, except as required by law,
no public announcement or other publicity regarding this Agreement or the
transactions referred to herein shall be made by any party hereto or any of
their respective Affiliates, officers, directors, employees, representations or
agents, without the prior consent of the other party, in any case (including a
public announcement or other publicly required by law), as to form, content,
timing and manner of distribution or publication; provided, however, that
nothing in this Section shall prevent such parties from discussing such
transactions with those Persons whose approval, agreement or opinion, as the
case may be, is required for consummation of such transactions.
13.13 Further Assurances. Upon the reasonable request of the Surviving
Corporation or the Company, each party will on and after the Closing Date
execute and deliver to the other parties such other documents, assignments and
other instruments as may be required to effectuate completely the transfer and
assignment to the Surviving Corporation of, and to vest fully in the Surviving
Corporation's title to, the Shares and the Resort Shares, and to effect and
evidence the provisions of this Agreement and the Related Agreements and the
transactions contemplated hereby and thereby.
13.14 Entire Understanding. The Exhibits and Schedules (including the
Disclosure Schedule) identified in this Agreement are incorporated herein by
reference and made a part hereof. This Agreement and the Related Agreements
supersede any and all prior oral agreements, arrangements and understandings
among the parties and the binding sale letter of intent that sets forth the
material terms and conditions on which the Purchaser agreed to
75
acquire the Company and Resorts, between the Company, Resorts and Purchaser,
dated as of February 4, 1997.
13.15 Jurisdiction; Attorneys' Fees. The parties hereto consent to
personal jurisdiction in the State of Florida and agree that the exclusive venue
and place of trial for their solution of any disputes arising in connection with
the interpretation or enforcement of this Agreement shall be a court of
competent jurisdiction located in Orange County, Florida. In the event of any
dispute between the parties hereto involving this Agreement or any Related
Agreement or arising out of the subject matter of this Agreement or any Related
Agreement, the prevailing party shall be entitled to recover against the other
party reasonable attorneys' fees and court costs.
13.16 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity of enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other situation or in any other jurisdiction. If the final
judgement of a court of competent jurisdiction declares that any term or
provision hereof is invalid or unenforceable, the parties agree that the court
making the determination of invalidity or unenforceability shall have the power
to reduce the scope, duration, or area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment may be appealed.
13.17 Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rule of strict construction shall be applied against any party. Any reference to
any federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise.
76
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
GOLF HOSTS, INC.
By: /s/ Stanley D. Wadsworth
Name: Stanley D. Wadsworth
Title: President
TM GOLF, INC.
By: /s/ Merrick R. Kleeman
Name: Merrick R. Kleeman
Title: President
RESORT HOLDERS:
/s/ Stanley D. Wadsworth
Stanley D. Wadsworth
/s/ Brenton Wadsworth
Brenton Wadsworth
/s/ C. James McCormick
C. James McCormick
77
EXECUTION COPY
LOAN AGREEMENT
between
GOLF HOST RESORTS, INC.
"Borrower"
and
GOLF TRUST OF AMERICA, L.P.
"Lender"
TABLE OF CONTENTS
Page
R E C I T A L S............................................................ 1
ARTICLE I
DEFINITIONS................................................................ 1
1.1 Defined Terms..................................... 1
1.2 Rules of Construction............................. 19
ARTICLE II
THE LOAN................................................................... 20
2.1 Agreement to Lend and Borrow...................... 20
2.2 Evidence of Indebtedness.......................... 21
2.3 Tranche I Loan Interest........................... 21
(a) Base Interest.............................. 21
(b) Increase in Base Interest.................. 21
(c) Participating Interest..................... 22
(d) Annual Reconciliation of
Participating Interest..................... 22
(e) Record-keeping............................. 23
2.4 Tranche II Loan Interest.......................... 23
2.5 Additional Charges................................ 23
2.6 Late Payment of Interest.......................... 23
2.7 No Deductions..................................... 24
2.8 Payment of Principal.............................. 24
2.9 Prepayment........................................ 24
2.10 Security.......................................... 25
2.11 Partial Release................................... 25
ARTICLE III
LOAN CLOSING............................................................... 27
3.1 Loan Documents.................................... 27
3.2 Borrower's Deliveries............................. 27
3.3 Representations, Warranties and
Covenants......................................... 27
3.4 Title Insurance................................... 28
3.5 Title to Property................................. 28
3.6 Condition of Property............................. 28
3.7 Utilities......................................... 28
3.8 Liquor License.................................... 28
3.9 Partnership Agreement............................. 28
3.10 Certification of Non-Foreign
Status............................................ 28
3.11 Legal Opinions.................................... 28
3.12 Satisfaction or Waiver of
Conditions Precedent to Merger
Agreement......................................... 28
ARTICLE IV
DISBURSEMENTS OF THE LOAN.................................................. 29
4.1 Disbursement on Closing Date ..................... 29
i
4.2 Requests for Subsequent
Disbursements of the Tranche I
Loan.............................................. 29
4.3 Requests for Subsequent
Disbursements of the Tranche II
Loan.............................................. 29
ARTICLE V
REPRESENTATIONS AND WARRANTIES............................................. 30
5.1 Organization and Power............................ 30
5.2 Authorization and Execution....................... 30
5.3 Noncontravention.................................. 30
5.4 No Special Taxes.................................. 31
5.5 Compliance with Existing Laws..................... 31
5.6 Real Property..................................... 32
5.7 Personal Property................................. 32
5.8 Warranties and Guaranties......................... 32
5.9 Insurance......................................... 32
5.10 Condemnation Proceedings;
Roadways.......................................... 33
5.11 Litigation........................................ 33
5.12 Labor Disputes and Agreements..................... 33
5.13 Financial Information............................. 34
5.14 Organizational Documents.......................... 34
5.15 Land Use.......................................... 34
5.16 Hazardous Materials............................... 34
5.17 Utilities......................................... 34
5.18 Curb Cuts......................................... 35
5.19 Leased Property................................... 35
5.20 Defects and Hazards............................... 35
5.21 Principal Place of Business....................... 35
5.22 Single Purpose Entity............................. 35
5.23 Removal of Collateral............................. 35
5.24 Rights in Escrow Account.......................... 35
5.25 Notices Under Merger Agreement.................... 36
ARTICLE VI
COVENANTS OF BORROWER...................................................... 36
6.1 Obligation to Withhold
Distributions..................................... 36
6.2 Impositions....................................... 37
(a) Payment of Impositions..................... 37
(b) Information and Reporting.................. 37
(c) Refunds.................................... 37
(d) Utility Charges............................ 37
(e) Assessment Districts....................... 37
6.3 Maintenance of the Collateral..................... 38
(a) Maintenance of Property.................... 38
(b) Borrower's Obligations..................... 38
6.4 Use of Property................................... 38
(a) Use........................................ 38
(b) Specific Prohibited Uses................... 38
(c) Membership Sales........................... 39
ii
(d) Grant of Easements, Etc.................... 39
(e) Borrower's Additional
Covenants as to Use........................ 40
6.5 Hazardous Materials............................... 40
(a) Remediation................................ 40
(b) Borrower's Indemnification
of Lender.................................. 40
(c) Survival of Indemnification
Obligations................................ 41
(d) Environmental Violations at
Expiration or Termination of
Agreement.................................. 41
(e) Environmental Statements................... 41
6.6 Maintenance and Repair............................ 42
(a) Borrower's Obligations..................... 42
(b) Mechanic's Liens........................... 42
6.7 Borrower's Right to Modify
Property.......................................... 43
(a) Borrower's Right to
Construct. ................................ 43
(b) Scope of Right............................. 44
6.8 Lender's Right to Audit
Calculation of ................................... 44
6.9 Annual Budget..................................... 45
6.10 Financial Statements.............................. 47
6.11 Liens, Encroachments and Other
Title Matters..................................... 48
(a) Liens...................................... 48
(b) Encroachments and Other Title Matters...... 48
(c) Survey..................................... 49
6.12 Permitted Contests................................ 49
(a) Authorization.............................. 49
(b) Indemnification of Lender.................. 50
6.13 Legal Requirements................................ 51
6.14 Actions Affecting Property........................ 51
6.15 Material Agreements............................... 51
6.16 Lender Inspections................................ 51
6.17 Trade Names....................................... 52
6.18 Officer's Certificates............................ 52
6.19 Protective Advances............................... 53
6.20 Reporting of Original Issue
Discount.......................................... 53
ARTICLE VII
INSURANCE.................................................................. 54
7.1 General Insurance Requirements.................... 54
(a) All Risk................................... 54
(b) Liability.................................. 54
(c) Flood...................................... 54
(d) Worker's Compensation...................... 55
7.2 Other Insurance................................... 55
7.3 Replacement Cost.................................. 55
7.4 Waiver of Subrogation............................. 55
iii
7.5 Form Satisfactory, Etc............................ 55
7.6 Change in Limits.................................. 56
7.7 Blanket Policy.................................... 56
7.8 Insurance Proceeds................................ 56
7.9 Disbursement of Proceeds.......................... 57
7.10 Excess Proceeds, Deficiency of
Proceeds.......................................... 58
7.11 Reconstruction Covered by
Insurance......................................... 58
(a) Destruction Rendering
Property Unsuitable for its
Primary Use................................ 58
(b) Destruction Not Rendering
Property Unsuitable for its
Primary Use................................ 58
7.12 Reconstruction Not Covered by
Insurance......................................... 59
7.13 No Abatement of Obligations....................... 59
7.14 Damage Near End of Term........................... 59
ARTICLE VIII
CONDEMNATION............................................................... 59
8.1 Total Taking...................................... 59
8.2 Partial Taking.................................... 60
8.3 Restoration....................................... 60
8.4 Award-Distribution................................ 60
8.5 Temporary Taking.................................. 60
ARTICLE IX
CAPITAL REPLACEMENT FUND................................................... 61
9.1 Capital Replacement Fund.......................... 61
9.2 Capital Replacement Fund to Be
Held Pursuant to the Terms of
the Westin Management Agreement................... 61
ARTICLE X
EVENTS OF DEFAULT AND REMEDIES............................................. 62
10.1 Events of Default................................. 62
10.2 Payment of Costs.................................. 64
10.3 Appointment of Receiver........................... 64
10.4 Waiver............................................ 64
10.5 Prepayment Premium................................ 64
10.6 Application of Funds.............................. 64
ARTICLE XI
PURCHASE OPTION............................................................ 64
ARTICLE XII
SALE, LEASING AND ASSIGNMENT............................................... 66
12.1 Prohibition Against .............................. 66
12.2 Leases............................................ 66
(a) Permitted Leases........................... 66
(b) Terms of Leases............................ 66
iv
(c) Copies..................................... 67
(d) Assignment of Rights in Leases............. 67
(e) Licenses, Etc.............................. 67
12.3 Transfers......................................... 67
12.4 REIT Limitations.................................. 68
12.5 Management Agreement.............................. 68
ARTICLE XIII
ARBITRATION................................................................ 68
13.1 Arbitration....................................... 68
13.2 Arbitration Procedures............................ 69
ARTICLE XIV
LENDER'S RIGHT TO PLEDGE THE NOTES; BORROWER'S AND LENDER'S
RIGHT OF FIRST OFFER....................................................... 69
14.1 Lender May Grant Liens............................ 69
14.2 Borrower's Right of First Offer
to Purchase....................................... 69
14.3 Lender's Right of First Offer to
Purchase.......................................... 70
ARTICLE XV
INDEMNIFICATION............................................................ 70
15.1 Borrower's Indemnification of
Lender............................................ 70
15.2 Lender's Indemnification of
Borrower.......................................... 71
15.3 Mechanics of Indemnification...................... 72
15.4 Survival of Indemnification
Obligations; Available Insurance
Proceeds.......................................... 72
ARTICLE XVI
MISCELLANEOUS.............................................................. 72
16.1 Notices........................................... 72
16.2 Authority to File Notices......................... 73
16.3 Inconsistencies with Loan
Documents......................................... 73
16.4 No Waiver; Remedies Cumulative.................... 74
16.5 Lender Approval of Instruments
and Parties....................................... 74
16.6 Lender Determination of Facts..................... 74
16.7 Incorporation of Preamble,
Recitals and Exhibits............................. 74
16.8 Entire Agreement.................................. 74
16.9 Further Assurances................................ 75
16.10 Changes, Waivers, Discharge and
Modifications in Writing.......................... 75
16.11 Choice of Law..................................... 75
16.12 Disbursements in Excess of Loan
Amount............................................ 75
16.13 Counterparts...................................... 75
16.14 Time is of the Essence............................ 75
v
16.15 Attorneys' Fees................................... 76
16.16 Severability...................................... 76
16.17 Interest Rate Limitation.......................... 76
16.18 Brokers........................................... 76
16.19 Non-Recourse as to Lender and
Borrower.......................................... 77
16.20 No Relationship................................... 78
16.21 Successors and Assigns............................ 78
16.22 Competition Between Lender and
Borrower.......................................... 78
16.23 Waiver of Jury Trial.............................. 78
16.24 Right of First Offer to Lease
Additional Golf Courses
Proximate to the Innisbrook
Property.......................................... 79
vi
EXHIBITS:
EXHIBIT A LEGAL DESCRIPTION OF INNISBROOK PREMISES
EXHIBIT B LEGAL DESCRIPTION OF TAMARRON PREMISES
EXHIBIT C CALCULATION OF NET OPERATING INCOME
EXHIBIT D CALCULATION OF GROSS REVENUE DURING
BASE YEAR
EXHIBIT E BUDGET
EXHIBIT F DESCRIPTION OF PROPOSED SANDPIPER AND HOTEL COMMON
AREA IMPROVEMENTS
EXHIBIT G DISBURSEMENT PROCEDURES
EXHIBIT H OPINION OF BORROWER'S COUNSEL
EXHIBIT I FORM OF PLEDGE AGREEMENT
EXHIBIT J FORM OF NOTE
EXHIBIT K FORM OF SECURITIES PURCHASE AGREEMENT
EXHIBIT L FORM OF SECURITY AGREEMENT
EXHIBIT M FORM OF DEED OF TRUST/MORTGAGE
EXHIBIT N FORM OF GUARANTY
EXHIBIT O FORM OF BORROWER'S CLOSING CERTIFICATE
EXHIBIT P FORM OF PARTNERSHIP AGREEMENT
EXHIBIT Q SPECIFIC CHANGE IN USE PROVISIONS FOR INNISBROOK
EXHIBIT R WARRANTY DISCLOSURE SCHEDULE
EXHIBIT S PERSONAL PROPERTY SCHEDULE
EXHIBIT T FAIR MARKET VALUE DETERMINATION PROCEDURES
EXHIBIT U ADDITIONAL COLLATERAL-INNISBROOK PROPERTY
vii
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is made as of
______________, 1997 by and between GOLF HOST RESORTS, INC., a Colorado
corporation ("Borrower"), and GOLF TRUST OF AMERICA, L.P., a Delaware limited
partnership ("Lender").
R E C I T A L S
A. On the Closing Date (as defined below), Borrower will own
(i) that certain real property located in the County of Pinellas, State of
Florida described on Exhibit A attached hereto (the "Innisbrook Premises"),
together with certain Tangible Personal Property (as defined below) and
Intangible Personal Property (as defined below) associated therewith
(collectively with the Innisbrook Premises, the "Innisbrook Property") and (ii)
that certain real property located in the County of La Plata, State of Colorado
described on Exhibit B attached hereto (the "Tamarron Premises"), together with
certain Tangible Personal Property and Intangible Personal Property associated
therewith (collectively with the Tamarron Premises, the "Tamarron Property").
B. Borrower has applied to Lender for the loan described
herein for the purpose of (i) purchasing certain Lender's Shares (as defined
below) pursuant to the Securities Purchase Agreement (as defined below) and (ii)
acquisition of the Innisbrook Property and the Tamarron Property.
C. Lender is willing to make the loan described herein, upon
the terms and subject to the conditions set forth herein. Each of the parties
acknowledges and agrees that the transaction contemplated hereby creates a
creditor/debtor relationship and not that of a landlord/tenant or partnership.
NOW, THEREFORE, in consideration of the covenants and
conditions herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used herein, the following terms have
the respective meanings set forth below:
"AAA" has the meaning provided in Section 13.1.
"Additional Base Interest" means interest, payable monthly, on
each dollar of the Tranche I Loan in excess of Sixty- Nine Million Nine Hundred
Seventy-Five Thousand Dollars ($69,975,000), accruing at the rate of 9.75% per
annum.
"Additional Charges" has the meaning provided in Section 2.5.
"Additional Collateral" means collectively:
(a) the Tamarron Property;
(b) Improvements located on the Tamarron Premises;
(c) those portions of the Innisbrook Property and those
Improvements located on the Innisbrook Premises that are not directly
associated with the operation of the golf course located on the
Innisbrook Premises, as more particularly shown on Exhibit U attached
hereto;
(d) any rights of Golf Hosts, Inc., a Florida corporation (the
parent of Borrower) ("Golf Hosts") in and to any amounts held in the
escrow account established pursuant to the Escrow Agreement (as defined
in the Merger Agreement); and
(e) the Lender's Shares, exclusive of the Pledged Lender's
Shares (and provided such shares shall not be pledged to Lender and do
not constitute security for Borrower's obligations hereunder or
otherwise under this Agreement or any of the other Loan Documents).
"Additional Interest Amount" means an amount of additional
interest lent to Borrower upon the date of the Transfer Triggering Event,
calculated as Seventeen Million Four Hundred Two Thousand Dollars ($17,402,000)
on the scheduled Maturity Date, discounted to present value using a discount
rate of 11.50%.
"Adjusted Net Operating Income" has the meaning set forth in
Exhibit C of this Agreement.
"Advisory Association" means that certain association of
lessees operating golf courses under a lease with Lender or any Affiliate of
Lender.
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person.
2
"Annual Budget" has the meaning provided in Section 6.9.
"Assignee" means any entity to which Lender assigns all or any
part of the Loans or the Notes.
"Assignment of Contracts and Permits" means a first priority
assignment of, and a first priority security interest in, the Innisbrook
Agreements and the Tamarron Agreements, executed by Borrower in favor of Lender,
together with all necessary third party consents to such assignment and such
other parties as Lender may require, all in form and substance satisfactory to
Lender.
"Authorizations" means all material licenses, permits and
approvals required by any governmental or quasi-governmental agency, body or
officer for the ownership, operation and use of the Property or any part
thereof.
"Award" means all compensation, sums or anything of value
awarded, paid or received on a total or partial Condemnation.
"Bankruptcy Event of Default" means any Event of Default
described in Section 10.1(c), (d) or (e).
"Base Interest" means, from time to time, (a) the Initial Base
Interest, plus (b) the Additional Base Interest, plus (c) the Tranche II
Interest (if applicable), in each case as increased from time to time pursuant
to the terms of this Agreement.
"Base Interest Escalator" has the meaning provided in Section
2.3(b).
"Base Year" means the calendar year 1996. A quarter-
by-quarter calculation of Gross Revenue in the Base Year is attached hereto as
Exhibit D.
"Borrower" means Golf Host Resorts, Inc. and any successor
thereto, or assignee thereof, as permitted by the terms of this Agreement.
"Borrower's Counsel" means Mayer, Brown & Platt.
"Borrower's Organizational Documents" means the partnership
agreement, articles of incorporation or operating agreement creating Borrower,
all other organizational documents of Borrower, and any and all amendments,
supplements and modifications thereto.
"Business Day" means a day other than Saturday, Sunday or any
day on which banking institutions in the City of New York,
3
New York are authorized or required by law or other governmental action to be
closed.
"Capital Budget" has the meaning provided in Section 6.9.
"Capital Expenditures" means expenditures that are properly
capitalized under GAAP; provided that Capital Expenditures shall exclude the
Tranche I Capital Expenditures .
"Capital Replacement Fund" means the amount of the Capital
Replacement Reserve, together with interest thereon as provided in Section 9.1,
less amounts withdrawn from the Capital Replacement Fund as provided in Section
9.1.
"Capital Replacement Reserve" means an amount equal to
$1,076,850 for Fiscal Year 1997 (pro rated from the Closing Date), $2,000,000
for Fiscal Year 1998 and for each Fiscal Year thereafter such amount increased
by 3% per annum, compounded annually, through 2001 and 4% per annum thereafter,
or such lesser amount as may be mutually agreed to by Borrower and Lender. Such
amount shall be deposited by Borrower quarterly as part of the Capital
Replacement Fund, as provided in Section 9.1 hereof.
"Certification of Non-Foreign Status" means a representation
and warranty contained in the Deed of Trust or in a separate affidavit, signed
under penalty of perjury by an authorized representative of Borrower stating (a)
that Borrower is not a "foreign corporation", "foreign partnership", "foreign
trust", or "foreign estate", as those terms are defined in the Code and the
regulations promulgated thereunder, (b) that Borrower is duly qualified to do
business in the States of Florida and Colorado, (c) Borrower's U.S. employer
identification number, and (d) the address of Borrower's principal place of
business. Such affidavit shall be consistent with the requirements of the
regulations promulgated under Section 1445 of the Code, as amended, and shall
otherwise be in form and substance acceptable to Lender.
"Change of Control" means:
(a) the issuance and/or sale by Borrower or the sale by any
stockholder or partner of Borrower of a Controlling interest in
Borrower to a Person other than to a Person that is an Affiliate of
Borrower, which shall include spouses and lineal descendants of any
stockholder of Borrower as well as any trusts created for estate
planning purposes where such stockholder and/or spouses and lineal
descendants are beneficiaries;
(b) the sale, conveyance or other transfer of all or
substantially all of the assets of Borrower (whether by
4
operation of law or otherwise), other than to a Person that is an
Affiliate of Borrower;
(c) any other transaction, or series of transactions, which
results in the shareholders or partners who control Borrower as of the
date hereof no longer having Control of Borrower; or
(d) any transaction pursuant to which Borrower is merged with
or consolidated into another entity (other than an entity owned and
Controlled by an Affiliate of Borrower), and Borrower is not the
surviving entity.
Notwithstanding the foregoing, a Change of Control shall not be deemed
to have occurred for purposes of this Agreement if the shareholders or partners
who Control Borrower as of the date hereof remain in Control of Borrower through
an agreement or equity interest.
"Closing Date" or "Closing" means the date upon which all of
the conditions set forth in Article III are satisfied and the proceeds of the
Tranche I Loan are disbursed to Borrower, which date shall in no event be later
than the Termination Date.
"Code" means the Internal Revenue Code of 1986, as the same
may be amended or supplemented, and the rules and regulations promulgated
thereunder.
"Collateral" has the meaning given such term in the Security
Agreement.
"Company" means GTA, Inc. and any subsidiaries thereof,
including GTA LP and GTA GP.
"Condemnation" means (a) the exercise of any governmental
power, whether by legal proceedings or otherwise, by a Condemnor, and (b) a
voluntary sale or transfer by Lender to any Condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending.
"Condemnor" means any public or quasi-public authority, or
private corporation or individual, having the power of condemnation.
"Condominiums" means the residential condominiums located on
the Innisbrook Property.
"Control" means (including, with correlative meanings, the
terms "Controlling" and "Controlled by"), as applied to any Person, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities, by contract or otherwise.
5
"Conversion Date" means the date Borrower elects, in its sole
discretion, to receive additional Lender's Shares, purchased with the Tranche II
Loan, in accordance with the rights of Borrower provided in the Securities
Purchase Agreement.
"Conversion Date Capitalization Rate" has the meaning given
such term in the Securities Purchase Agreement.
"CPI" means the United States Consumer Price Index, All Urban
Consumers, U.S. City Average, All Items (1982-84=100).
"Date of Taking" means the date the Condemnor has the right to
possession of the property being condemned.
"Debt Service" means all Interest and principal payable by
Borrower to Lender pursuant to the terms of this Agreement.
"Deed of Trust" means, collectively, one or more deeds of
trust or mortgages, with assignments of rents, fixture filings and memorandums
of option to purchase, in substantially the form attached hereto as Exhibit M,
executed by Borrower, as trustor or mortgagor, for the benefit of Lender as
beneficiary or mortgagee, creating a first priority lien, subject only to
Permitted Exceptions, on the Innisbrook Premises and the Tamarron Premises and
all buildings, fixtures and improvements now or hereafter owned or acquired by
Borrower and situated thereon, and all rights and easements appurtenant thereto,
in the amount of the Loan Amount.
"Draw Request Documents" means the documents listed in clauses
(a) through (g), inclusive, of Exhibit G attached hereto.
"Employment Agreements" shall mean all employment agreements,
written or oral, between Borrower and the persons employed with respect to the
Property in effect as of the date hereof.
"Environmental Laws" means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss.9601,
et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. ss.6901, et seq.;
the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq.; the Hazardous
Materials Transportation Act, as amended, 49 U.S.C. ss.1801, et seq.; the
Superfund Amendments and Reauthorization Act of 1986, Pub. L. 99- 499 and
99-563; the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C.
ss. 651, et seq.; the Clean Air Act, as amended, 42 U.S.C. ss.7401, et seq.; the
Safe Drinking Water Act, as amended, 42 U.S.C. ss.201, et seq.; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. ss.1251, et seq.; and all
federal, state and local environmental health and safety statutes, ordinance,
codes, rules, regulations, orders and decrees regulating, relating to or
imposing liability or standards concerning or in connection with Hazardous
Materials.
6
"Event of Default" means the occurrence of any of the events
listed in Section 10.1 and the expiration of any applicable cure period provided
therein.
"Fair Market Value" means the market value of the applicable
Property on the date of determination, as established pursuant to the procedures
identified on Exhibit T.
"Financing Statement" means a UCC-1 financing statement
executed by Borrower in favor of Lender, perfecting Lender's security interest
in the Collateral, in form and substance satisfactory to Lender.
"Fiscal Quarter" means the three-month periods (or applicable
portions thereof) in any Fiscal Year from January 1 through March 31, April 1
through June 30, July 1 through September 30 and October 1 through December 31.
"Fiscal Year" means the twelve (12) month period from January
1 to December 31 of each year; provided that for purposes of the Term and the
Pledge Agreement, the first Fiscal Year shall be deemed to include the period
from the Closing Date to December 31, 1997.
"Fixtures" means all permanently affixed equipment, machinery,
fixtures, and other items of real and/or personal property, including all
components thereof, now or hereafter located in, on or used in connection with
and permanently affixed to or incorporated into the Property, including all
furnaces, boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, air and water pollution control, waste disposal,
air-cooling and air-conditioning systems and apparatus, sprinkler systems and
fire and theft protection equipment, all of which, to the greatest extent
permitted by law, are hereby deemed by the parties hereto to constitute real
estate, together with all replacements, modifications, alterations and additions
thereto.
"Full Replacement Cost" means the actual replacement cost from
time to time of the improvement being insured, including the increased cost of a
construction endorsement, less exclusions provided in the fire insurance policy.
"GAAP" means generally accepted accounting principles,
consistently applied.
"Golf Hosts Guaranty" means the payment and performance
guaranty to be executed at Closing by Golf Hosts, Inc., a Florida corporation,
as guarantor.
"Gross Revenue" means all revenues accrued by Borrower
(whether by Borrower or any subtenants, assignees, concessionaires or licensees)
from or by reason of the operation
7
of the operations at the Innisbrook Property calculated in accordance with GAAP
(but excluding reasonable reserves for refunds, allowances and bad debts
applicable to such operations), including (i) revenues received from the
operation of the hotel at the Innisbrook Property excluding payments made by
Borrower pursuant to the Master Lease, (ii) revenues from membership initiation
fees (to the extent described in Exhibit E attached hereto), (iii) periodic
membership dues, (iv) greens fees, (v) fees to reserve a tee time, (vi) guest
fees, (vii) golf cart rentals, (viii) parking lot fees, (ix) locker rentals, (x)
fees for golf club storage, (xi) fees for the use of swim, tennis or other
facilities, (xii) charges for range balls, range fees or other fees for golf
practice facilities, (xiii) fees or other charges paid for golf or tennis
lessons (except where retained by or paid to a USTA or PGA professional in
accordance with historical practice at the Innisbrook Property), (xiv) fees or
other charges for fitness centers, (xv) forfeited deposits with respect to any
membership application, (xvi) transfer fees imposed on any member in connection
with the transfer of any membership interest, (xvii) fees or other charges paid
to Borrower by sponsors of golf tournaments at the Innisbrook Property, (xviii)
advertising or placement fees paid by vendors in exchange for exclusive use or
name rights at the Innisbrook Property, (xvix) fees received in connection with
any golf package sponsored by any hotel group, condominium group, golf
association, travel agency, tourist or travel association or similar payments,
(xx) the operation of snack bars, restaurants, bars, catering functions, and
banquet operations, (xxi) sale of merchandise and inventory on the Innisbrook
Property, and (xxii) photography services
provided, however, that Gross Revenue shall not include:
(a) The amount of all taxes, assessments, Impositions and
other governmental charges and assessments of every kind and nature,
including, without limitation, city, county, state or federal taxes,
including all sales, admissions, usage, or excise tax on the items
included in Gross Revenue, which is both added to or incorporated in
the selling price and paid to the taxing authority by Borrower;
(b) Revenues or proceeds from sales or trade-ins of machinery,
vehicles, trade fixtures or personal property owned by Borrower used in
connection with Borrower's operation of the Innisbrook Property;
(c) Interest or other income derived from the investment of
surplus funds or reserves;
(d) Any amounts recovered in any litigation against third
parties except for amounts awarded to compensate for lost revenues
otherwise includable in Gross Revenue;
8
(e) Any condemnation or taking proceeds, whether or not such
proceeds are characterized as compensation for lost rent;
(f) Insurance proceeds, unless (and except to the extent that)
such proceeds are characterized as business interruption and/or loss of
"rental value" insurance proceeds (except for such proceeds
attributable to a Lease if (and for so long as) the tenant thereunder
has the right to terminate such Lease as a result of the casualty in
question);
(g) Any proceeds resulting from the sale, exchange, transfer,
financing or refinancing of all or any part of the Real Property,
Tangible Personal Property or Intangible Personal Property;
(h) Any capital or equity contributions or other infusions of
capital or equity to the Borrower or the sale of any Property,
Collateral or Lender's Shares;
(i) Any proceeds of any other indebtedness of the Borrower;
(j) Forfeited security deposits and other security deposits
received or surrender or termination payment made or other amounts
received from tenants or guests to compensate for damage to or loss of
all or portions of the Real Property or Tangible Personal Property; and
(k) Gratuities to employees if separately itemized on the
customer's bills or checks.
"GTA GP" means GTA GP, Inc. and any successor thereto.
"GTA, Inc." means Golf Trust of America, Inc., a Maryland
corporation, an Affiliate of Lender.
"GTA LP" means GTA LP, Inc. and any successor thereto.
"Guarantor" means Westin Hotel Company.
"Hazardous Material" means any substance, material, waste, gas
or particulate matter which is regulated by any local, state or federal
governmental authority, including but not limited to any material or substance
which is (i) defined as a "hazardous waste", "hazardous material", or
"restricted hazardous waste" or words of similar import under any provision of
any Environmental Law; (ii) petroleum or petroleum products; (iii) asbestos;
(iv) polychlorinated biphenyl; (v) radioactive material; (vi) radon gas; (vii)
designated as a "hazardous substance" pursuant to Section 311 of the Clean Water
Act, 33 U.S.C. Section 1251, et seq. (42 U.S.C. Section 1317); (viii) defined as
a "hazardous waste" pursuant to Section 1004 of the
9
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq. (42
U.S.C. Section 6903); or (ix) defined as a "hazardous substance" pursuant to
Section 101 of the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 9601, et seq. (42 U.S.C. Section 9601).
"Hilton Management Agreement - Innisbrook" means the
management agreement dated as of March 25, 1993 by and between Hilton Hotels
Corporation and Borrower, whereby Hilton Hotels
Corporation manages the Innisbrook Property.
"Hilton Management Agreement - Tamarron" means the management
agreement dated as of November 20, 1995 by and between Hilton Hotels Corporation
and Borrower, whereby Hilton Hotels
Corporation manages the Tamarron Property.
"Impartial Appraiser" means the casualty insurance company
which is then carrying the largest amount of casualty insurance carried on the
Property.
"Impositions" means collectively:
(a) all taxes (including all real and personal
property, ad valorem, sales and use, single business, gross receipts,
transaction privilege, rent or similar taxes);
(b) assessments and levies (including all assessments
for public improvements or benefits, whether or not commenced or
completed prior to the date hereof and whether or not to be completed
within the Term);
(c) excises;
(d) fees (including license, permit, inspection,
authorization and similar fees); and
(e) all other governmental charges;
in each case whether general or special, ordinary or extraordinary, or foreseen
or unforeseen, of every character in respect of the Property and/or the Interest
or Additional Charges (including all interest and penalties thereon due to any
failure in payment by Borrower), which at any time during or in respect of the
Term hereof may be assessed or imposed on or in respect of or be a lien upon (i)
Lender or Lender's interest in the Property; (ii) the Property or any part
thereof or any therefrom or any estate, right, title or interest therein; or
(iii) any operation, use or possession of, or sales from or activity conducted
on or in connection with the Property or the leasing or use of the Property or
any part thereof; provided, however, that Impositions shall not include:
10
(aa) any taxes based on net income (whether denominated as an
income, franchise, capital stock or other tax) imposed on Lender or any
other Person other than Borrower;
(bb) any transfer or net revenue tax of Lender or any other
Person other than Borrower; or
(cc) any tax imposed with respect to any principal or interest
on any indebtedness on the Property.
"Improvements" means the golf course, driving range, putting
greens, clubhouse facilities, snack bar, restaurant, pro shop, buildings,
structures, parking lots, improvements, Fixtures and other items of real estate
located on (a) the Innisbrook Premises as more particularly described in Exhibit
A attached hereto, and (b) the Tamarron Premises as more particularly described
on Exhibit B attached hereto; provided that the Improvements shall exclude any
portion of the Additional Collateral released in accordance with the terms of
the Loan Documents.
"Initial Base Interest" means interest payments of $561,588.58
per month (pro rated for any partial months), totaling $6,739,063 per annum.
"Innisbrook Agreements" means the Master Lease, the Hilton
Management Agreement - Innisbrook, the Westin Management Agreement and Merger
Agreement.
"Innisbrook Hotel" means the existing hotel facility on the
Innisbrook Property, including all common areas and common facilities, as the
same may be altered, added to or reconstructed from time to time.
"Innisbrook Premises" means that certain real property located
in the City of Tarpon Springs, County of Pinellas, State of Florida described on
Exhibit A attached hereto.
"Innisbrook Property" has the meaning given in Recital A.
"Insurance Requirements" mean all terms of any insurance
policy required by this Agreement and all requirements of the issuer of any such
policy.
"Intangible Personal Property" means all intangible personal
property owned by Borrower and used solely in connection with the ownership,
operation, leasing or maintenance of the Real Property or the Tangible Personal
Property, and any and all trademarks and copyrights, guarantees, Authorizations,
general intangibles, business records, plans and specifications, surveys, all
licenses, permits and approvals solely with respect to the
11
construction, ownership, operation or maintenance of the Property.
"Interest" means, collectively, the Base Interest (as
increased by the Base Rent Escalator) and the Participating Interest.
"Legal Requirements" means all federal, state, county,
municipal and other governmental statutes, laws (including the Americans with
Disabilities Act and any Environmental Laws), rules, orders, regulations,
ordinances, judgments, decrees and injunctions affecting either the Property or
the construction, use or alteration thereof, whether now or hereafter enacted
and in force, including any which (i) require repairs, modifications, or
alterations in or to the Property; (ii) in any way adversely affect the use and
enjoyment thereof, and all permits, licenses and authorizations and regulations
relating thereto, and all covenants, agreements, restrictions and encumbrances
contained in any instruments, either of record or known to Borrower (other than
encumbrances created by Lender without the consent of Borrower), at any time in
force affecting the Property; or (iii) require the cleanup or other treatment of
any Hazardous Material.
"Lender" means Golf Trust of America, L.P., and any successor
or assignee permitted in accordance with the terms of this Agreement.
"Lender Assignee" has the meaning given in Article XIV.
"Lender's Shares" means partnership units of Lender and common
stock of GTA, Inc.
"Lender's Shares/Purchase Price" means an amount equal to
400,000 partnership units of Lender; provided such amount shall be reduced to
125,000 partnership units of Lender upon a Transfer Triggering Event; and
further provided in either event such partnership units shall be immediately
convertible, on a one for one basis, into shares of common stock of GTA, Inc.
"Lender's Title Policy" means a title insurance policy in the
form of an American Land Title Association Extended Coverage Loan Policy - 1970
(without modification, revision or amendment) with ALTA Endorsement Form 1
Coverage (LP 10), if available insuring that on the Closing Date, Borrower owns
fee simple title to the Real Property (or with respect to the land described in
Exhibit F relating to the expansion of the Sandpiper golf course, an irrevocable
easement over such land) and that the Deed of Trust is a valid first lien on the
Property in the amount of the Loan Amount. The Lender's Title Policy shall, if
available, contain CLTA Endorsements (or equivalent) 100, 103.7, 104.6, 111.5,
116.1, a shared appreciation/participating mortgage endorsement in form and
substance satisfactory to Lender, and such other endorsements as Lender
requires. Except as approved
12
by Lender in writing prior to the Closing Date, the Lender's Title Policy shall
not contain any exceptions for rights of parties in possession, easements not of
record or unpaid installments of special assessments, or any other exceptions to
coverage not approved by Lender. The Lender's Title Policy shall contain such
reinsurance agreements and direct access agreements as Lender may require.
During the term of the Loans, Lender may reasonably require, if available, other
endorsements to the Lender's Title Policy, including CLTA Endorsements 101.2 and
122 (or equivalent).
"Loan or Loans" means the participating loans described in
this Agreement in the maximum principal amount of the Loan Amount, consisting of
the Tranche I Loan, the Tranche II Loan and the Additional Interest Amount.
"Loan Amount" means the Tranche I Loan Amount, the Tranche II
Loan Amount and the Additional Interest Amount.
"Loan Documents" means this Agreement, the Notes and the
documents described in Section 2.10
"Master Lease" means, (i) with respect to the Innisbrook
Property, the master lease adopted August 1, 1990 and amended and restated
August 1, 1992, September 15, 1993 and July 17, 1995, and (ii) with respect to
the Tamarron Property, the master lease dated July 15, 1993 as amended on
September 15, 1994, in each case between Borrower and certain of the owners of
the condominiums at the Innisbrook Property and the Tamarron Property,
respectively, as the same may be modified, amended or supplemented from time to
time.
"Maturity Date" means _______________, 2027, or such earlier
date as the principal balance of the Loan is due following an Event of Default
hereunder.
"Merger Agreement" means the Stock Purchase and Merger
Agreement by and among Golf Hosts, Inc., Stanley D. Wadsworth, Brenton
Wadsworth, C. James McCormick and TM Golf Hosts, Inc.
"Net Operating Income" has the meaning set forth in Exhibit C
of this Agreement. Interest accruing on the Additional Interest Amount shall not
be included for the purposes of calculating Net Operating Income under this
Agreement or any of the other Loan Documents, including, without limitation, the
Securities Purchase Agreement and the Pledge Agreement.
"Non-Complying Party" has the meaning provided in Section
13.2.
"Note A" has the meaning provided in Section 2.2.
"Note B" has the meaning provided in Section 2.2.
13
"Notes" means each secured promissory note evidencing the
Loan, executed by Borrower, payable to the order of Lender, in an original
principal amount equal to, in the case of Note A, the Tranche I Loan Amount and,
in the case of Note B, the Tranche II Loan Amount, each in the form attached
hereto as Exhibit J.
"Officer's Certificate" means a certificate of Borrower signed
by an officer authorized to so sign by the board of directors or by-laws, or if
Borrower is a partnership, by an officer authorized to so sign by the general
partners.
"Official Records" means the Official Records of a particular
State and County.
"Operating Budget" has the meaning provided in Section 6.9.
"Other Leased Properties" means the property or properties
leased or hereafter leased to Borrower or an Affiliate of Borrower by Lender or
an Affiliate of Lender, or mortgaged by Borrower or an Affiliate of Borrower to
Lender or an Affiliate of Lender, other than pursuant to this Agreement.
"Overdue Rate" means, on any date, a rate equal to the Prime
Rate plus an additional five percent (5%) per annum, but in no event greater
than the maximum rate then permitted under applicable law.
"Participating Interest" means, for any Fiscal Year during the
Term, a percentage of the positive difference between that year's Gross Revenue
and the Gross Revenue for the Base Year, pro rated for any partial periods. For
purposes of calculating the Participating Interest, the following threshold
amounts (excepting the Base Year Gross Revenue) shall each be increased (but not
decreased) each year beginning in 1998 in an amount equal to the increase in the
CPI for 1997 (pro rated from the Closing Date). The Participating Interest shall
be calculated as follows:
(i) Seventeen percent (17%) of the positive difference between
that year's Gross Revenue and the Base Year Gross Revenue in excess of
$39,968,000, but less than or equal to $43,000,000 (as increased by the CPI);
(ii) Twenty percent (20%) of the positive difference between
that year's Gross Revenue and the Base Year Gross Revenue in excess of
$43,000,000 (as increased by the CPI) but less than $50,000,000 (as increased by
the CPI); and
(iii) Twenty-five percent (25%) of the positive difference
between that year's Gross Revenue and the Base Year Gross Revenue in excess of
$50,000,000 (as increased by the CPI).
14
"Partnership" means Golf Trust of America, L.P., a Delaware
limited partnership.
"Permitted Assignee" means a Person or an Affiliate of a
Person meeting one or more of the following standards:
(a) an existing lessee under a lease with Lender or any
Affiliate of Lender who is not then in default under its lease;
(b) any entity affiliated with an entity acquiring from
Borrower or an Affiliate of Borrower its resort and related operations
located at or adjacent to the Innisbrook Property or the Tamarron
Property, and provided such entity (i) is not generally recognized in
the community as being of ill-repute or as being in any other manner a
Person with whom or with which a prudent business person would not wish
to associate in a commercial venture and (ii) shall have the financial
resources sufficient to enable it to satisfy the obligations of
Borrower under this Agreement (provided for purposes of this subsection
(ii) such entity shall not be required to have financial resources in
excess of those of Borrower at the time of such transfer);
(c) a list of pre-approved assignees prepared by Lender from
time to time in consultation with the Advisory Association.
"Payment and Performance Guaranty" means an Agreement Re
Guaranty of Funds executed by Guarantor in the form attached hereto as Exhibit
N.
"Permits" means, collectively, (a) all authorizations,
approvals, permits, variances and land use entitlements relating to the Property
and (b) all permits, licenses and agreements required for the use, occupancy or
operation of the Property.
"Permitted Exceptions" means those exceptions to title
contained in the Lender's Title Policy as accepted and approved by Lender on the
Closing Date, which approval shall not be unreasonably withheld or delayed,
together with any other exceptions permitted by this Agreement or the Loan
Documents.
"Person" means and includes natural persons, corporations,
limited partnerships, limited liability companies, general partnerships, joint
stock companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts, Indian tribes or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
15
"Pledge Agreement" means that certain pledge agreement dated
as of the date of this Agreement, by and between Borrower and Lender, in the
form attached hereto as Exhibit I.
"Pledged Lender's Shares" means the Lender's Shares
pledged pursuant to the Pledge Agreement.
"Potential Default" means the existence of any circumstance or
the occurrence of any event which, with the giving of notice, the passage of
time or both would constitute an Event of Default under any of the Loan
Documents.
"Preliminary Title Report" means a current preliminary title
report issued by the Title Company covering the Real Property and showing all
exceptions to title and accompanied by legible copies of all recorded documents
referred to in such exceptions.
"Prepayment Differential" shall mean the interest rate that is
equal to (a) the Base Interest then payable, together with any increases as
herein provided, plus the amount of Participating Interest payable for the
immediately prior calendar year calculated as a percentage yield, minus the
Reinvestment Yield, divided by (b) twelve (12), provided the Prepayment
Differential shall in no event be less than zero.
"Primary Intended Use" means the operation of a golf course
and the operation of the related resort and conference facilities and other uses
and activities incidental or related to the operation thereof, including
development and sale of adjacent single or multi-family home sites, commercial
properties and condominium and timeshare units.
"Prime Rate" means on any date, a rate equal to the annual
rate on such date announced by Citibank, N.A., or its successor entity, to be
its prime rate or, if the prime rate is discontinued, the base rate for a 90-day
unsecured loan to its corporate borrowers of the highest credit standing.
"Property" means, collectively, the Innisbrook Property and
the Tamarron Property; provided that the Property shall exclude any portion of
the Additional Collateral released in accordance with the terms of the Loan
Documents.
"Purchase Option" has the meaning specified in Article XI.
"Purchase Price for the Contingent Additional OP Units" has
the meaning set forth in the Securities Purchase Agreement.
"Real Property" means, collectively, the Innisbrook Premises
and the Tamarron Premises, together with all Improvements thereon, and all
easements and appurtenances
16
attached thereto; provided that the Real Property shall exclude any portion of
the Additional Collateral released in accordance with the terms of the Loan
Documents.
"Reinvestment Yield" shall mean the yield on the U.S. Treasury
issue (primary issue) with a maturity date closest to the scheduled Maturity
Date, with such yield based on the bid price for such issue as published in the
Wall Street Journal on the date that is fourteen (14) days prior to such
prepayment date (or if such bid price is not published on that date, the next
preceding date when such bid price is published), less two hundred (200) basis
points.
"Release Date" has the meaning set forth in Section 2.11(b).
The term "Release Date" shall also include the date upon which the Loan is
repaid in full and Borrower has fully discharged its obligations under the Loan
Documents.
"Securities Purchase Agreement" means the Purchase Agreement
between Borrower and Lender in the form attached hereto as Exhibit K.
"Security Agreement" means a security agreement, executed by
Borrower in favor of Lender, creating a first priority security interest in the
Collateral, in the form attached hereto as Exhibit L.
"State" means, collectively, each State or Commonwealth in
which the Property is located.
"Tangible Personal Property" means all items of tangible
personal property and fixtures (if any) owned by Borrower and located on or used
solely in connection with the Real Property, including, but not limited to,
machinery, equipment, furniture, furnishings, movable walls or partitions, phone
systems, restaurant equipment, computers or trade fixtures, golf course
operation and maintenance equipment, including mowers, tractors, aerators,
sprinklers, sprinkler and irrigation facilities and equipment, valves or rotors,
driving range equipment, athletic training equipment, office equipment or
machines, antiques or other decorations, furniture, computers or other control
systems, and equipment or machinery of every kind or nature, including all
warranties and guaranties associated therewith.
"Tamarron Agreements" means the Master Lease respecting the
Tamarron Property and the Hilton Management Agreement - Tamarron.
"Tamarron Premises" means that certain real property located
in the City of Durango, County of La Plata, State of Colorado described on
Exhibit B attached hereto.
17
"Tamarron Property" has the meaning given in Recital A.
"Term" means the period from the Closing Date through the
earlier of (a) the Maturity Date, or (b) such other date as this agreement is
terminated due to a default by Borrower or otherwise.
"Termination Date" means September 30, 1997.
"Title Company" means as to the Innisbrook Property, Stewart
Title of Tampa, Florida and as to the Tamarron Property, Basin Title Insurance
Agency, Inc., Durango, Colorado, as agent for Stewart Title Guaranty Company.
"Tranche I Capital Expenditures" means the costs to be
incurred in connection with the development of a nine-hole expansion of the
Sandpiper golf course on to adjacent property described on Exhibit F on which
Borrower has an irrevocable easement and improvements to the common areas and
common facilities of the Innisbrook Hotel described on Exhibit F hereto (which
shall be funded through a borrowing of the Tranche I Loan). The Tranche I
Capital Expenditures shall also be deemed to include up to $1,000,000.00 to be
used by Borrower for working capital purposes.
"Tranche I Loan" means the Loan made pursuant to Sections
2.1(a) and (b), evidenced by Note A, in a principal amount not to exceed the
Tranche I Loan Amount.
"Tranche I Loan Amount" means Seventy-Eight Million Nine
Hundred Seventy-Five Thousand Dollars ($78,975,000).
"Tranche II Interest" means the interest accruing on the
Tranche II Loan Amount, initially at the rate of the Conversion Date
Capitalization Rate, as increased by the Base Rent Escalator on the date of
disbursement of such loan and for each of the next four (4) years.
"Tranche II Loan" means the Loan made pursuant to Section
2.1(c), evidenced by Note B in the principal amount of the Tranche II Loan
Amount.
"Tranche II Loan Amount" means the dollar amount of the
Purchase Price for the Contingent Additional OP Units pursuant to the Securities
Purchase Agreement.
"Transfer Triggering Event" means:
(a) the issuance and/or sale by Borrower (which for purposes
of this definition includes Golf Hosts, Inc., which owns a one hundred
percent (100%) interest in Borrower) of any interest in Borrower,
including any common stock, preferred stock or otherwise, or the
issuance and/or sale by
18
Borrower of any debt instrument, option, warrant or other instrument
convertible into an equity interest in Borrower, including the entering
into an agreement to do the foregoing;
(b) the sale, pledge, transfer, assignment, hypothecation,
gift or devise by any five percent (5%) or greater stockholder or
partner of Borrower of any interest in Borrower (including any such
transfers by any stockholder or partner of any Person which owns a five
percent (5%) or greater interest in Borrower), to any Person regardless
of whether following such transfer the transferor retains an interest
in Borrower, including transfers by will, intestate succession, gift,
devise, interspousal transfer or transfers to a trust, regardless of
whether such trust is controlled by the transferor; transfers by
operation or law, and any and all other transfers whether voluntary or
involuntary, including the entering into an agreement to do the
foregoing;
(c) the sale, pledge, conveyance or other transfer of all or
substantially all of the assets of Borrower (whether by operation of
law or otherwise, voluntary or involuntary), including transfers to an
Affiliate of Borrower, including the entering into an agreement to do
the foregoing, excluding, however, transfers to Lender to secure
Borrower's obligations hereunder;
(d) any transaction pursuant to which Borrower is merged with
or consolidated into another entity (including, without limitation,
transfers to entities owned and Controlled by an Affiliate of Borrower
as of the date hereof), including the entering into an agreement to do
the foregoing; and
(e) any and all other transfers which have the effect of
transferring or alienating any interest of a five percent (5%) holder
of Borrower or any entity which owns Borrower, including the entering
into an agreement to do the foregoing.
"Unsuitable For Its Primary Intended Use" means a state of
condition of the Property such that in the good faith, reasonable judgment of
Borrower, the Property cannot be operated on a commercially practicable basis
for its Primary Intended Use.
"Utilities" means public sanitary and storm sewers, natural
gas, telephone, public water facilities, electrical facilities and all other
utility facilities and services necessary for the operation and occupancy of the
Property.
"Westin Management Agreement" means that certain Management
Agreement by and between Westin and Borrower dated as
19
of May 7, 1997 wherein Westin will manage the Innisbrook Property for an initial
term of twenty (20) years, commencing upon expiration of the Hilton Management
Agreement - Innisbrook.
1.2 Rules of Construction. The following rules shall apply to
the construction and interpretation of this Agreement:
(a) Singular words shall connote the plural number as well as
the singular and vice versa, and the masculine shall include the feminine and
the neuter.
(b) All references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Agreement.
(c) The table of contents and headings contained herein are
solely for convenience of reference and shall not constitute a part of this
Agreement nor shall they affect its meaning, construction or effect.
(d) "Including" and variants thereof shall be deemed to mean
"including without limitation."
(e) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles then in effect.
(f) Each party hereto and its counsel have reviewed and
revised (or requested revisions of) this Agreement and have participated in the
preparation of this Agreement, and therefore any usual rules of construction
requiring that ambiguities are to be resolved against a particular party shall
not be applicable in the construction and interpretation of this Agreement or
any exhibits hereto.
ARTICLE II
THE LOAN
2.1 Agreement to Lend and Borrow. Subject to the terms and
conditions of this Agreement, Lender agrees to lend to Borrower, and Borrower
agrees to borrow from Lender, up to the Loan Amount. The Loan proceeds shall be
used for (a) the purchase of the Innisbrook Property and the Tamarron Property,
(b) payment of the purchase price for the Lender's Shares pursuant to the
Securities Purchase Agreement, (c) in the case of the Tranche II Loan, payment
of the Purchase Price for the Contingent Additional OP Units, and (d) subject to
the satisfaction of the conditions set forth in Section 4.2, the development of
a nine-hole expansion of the Sandpiper golf course and improvements to the
common areas of the Innisbrook Hotel that constitute a portion of the Innisbrook
Property, as more particularly described on Exhibit F hereto. All payments by
20
Borrower to Lender hereunder shall be made to the address specified in the
Notes, or as otherwise specified in writing to Borrower. Loan proceeds shall be
disbursed at the following times and in the following amounts:
(a) If Borrower has fully satisfied the conditions of Article
III, Lender shall disburse Loan proceeds in the principal amount of $69,975,000
on the Closing Date.
(b) If Borrower has fully satisfied the conditions to
additional disbursements in Section 4.2, Lender shall disburse additional Loan
proceeds in an aggregate amount, together with all other amounts disbursed
pursuant to this Section 2.1(b), not to exceed the principal amount of
$9,000,000, when requested by Borrower in accordance with the terms and
conditions of Article IV.
(c) If Borrower elects to buy the Contingent Additional OP
Units, then Lender shall, subject to Borrower having fully satisfied the
conditions to additional disbursements in Section 4.3, disburse to Borrower the
Tranche II Loan in the Tranche II Loan Amount.
(d) If the Loan is not prepaid upon a Transfer Triggering
Event, then Lender shall loan to Borrower the Additional Interest Amount. Such
amount shall be added to the outstanding principal balance of the Loan, shall be
evidenced by a separate instrument, shall accrue interest at 11.50% and shall
not be prepayable in whole or in part. No interest shall be payable with respect
to the Additional Interest Amount until the Maturity Date.
The aggregate principal amount of the Tranche I Loan shall not under any
circumstances exceed the Tranche I Loan Amount. The aggregate principal amount
of the Tranche II Loan shall not under any circumstances exceed the Tranche II
Loan Amount. Notwithstanding anything in this agreement to the contrary, no
further disbursements of the Tranche I Loan shall be made following December 31,
2000.
2.2 Evidence of Indebtedness. The Tranche I Loan shall be
evidenced by a promissory note in the form of Exhibit J- 1 hereto ("Note A").
Disbursements of the Tranche I Loan shall be charged and funded under Note A.
The Tranche II Loan shall be evidenced by a promissory note in the form of
Exhibit J-2 hereto ("Note B"). Disbursements of the Tranche II Loan shall be
charged and funded under Note B. Disbursements of the Additional Interest Amount
shall be evidenced by a separate note and shall be charged and funded
thereunder.
2.3 Tranche I Loan Interest. Borrower will pay to Lender, in
lawful money of the United States of America, Interest until the Tranche I Loan
is repaid in full on the outstanding
21
principal amount of the Tranche I Loan in accordance with the following terms of
this Section 2.3. If any payment owing hereunder shall otherwise be due on a day
that is not a Business Day, such payment shall be due on the next succeeding
Business Day:
(a) Base Interest. Payments of Base Interest shall be paid
monthly, on the first Business Day of each month in arrears.
(b) Increase in Base Interest. Beginning on January 1, 1998
and on each January 1 thereafter through and including January 1, 2002, the Base
Interest payments for the year then-commencing shall be increased by five
percent (5%) over the aggregate Base Interest payments for the previous year
(the "Base Interest Escalator"); provided the January 1, 1998 increase shall be
pro rated for the number of days in the Term in 1997. In addition, if the
Tranche II Loan is funded, then the Base Interest Escalator shall equal three
percent (3%) effective immediately and shall continue to apply to each of the
four (4) years following such increase, with the increase effective on the
anniversary of the increase in Base Interest as provided in Section 2.3(e) in
lieu of increases on January of each year (after which time no increase will be
applicable).
(c) Participating Interest. In addition to Base Interest,
Borrower shall pay Participating Interest as provided herein. Beginning in the
first year of the Term and continuing throughout the Term, Borrower shall
calculate the Gross Revenue for each Fiscal Quarter (or shorter period, if
applicable) within fifteen (15) days of the end of such Fiscal Quarter (or
shorter period, if applicable) and submit such calculation in writing to Lender
by way of an Officer's Certificate. If the Gross Revenue for that Fiscal Quarter
(or shorter period, if applicable) is greater than the Gross Revenue for the
same Fiscal Quarter (or shorter period, if applicable) in the Base Year (and,
following the Fiscal Quarter ending March 31, on a year-to-date basis), on a pro
rata basis, then Borrower shall pay to Lender the Participating Interest upon
submittal of the Officer's Certificate. During any period in which the
Participating interest is subject to a ceiling, such ceiling shall apply to each
of the Participating Interest payments due during any Fiscal Quarter. The
Participating Interest payable in any period in any Fiscal Year shall be
adjusted to reflect the Participating Interest paid on a year-to-date cumulative
basis for the Fiscal Year (pro rated for any partial periods) and the limits set
forth in the next two sentences on a pro rated basis. The increase in Interest
resulting from the payment of Participating Interest (together with any increase
in Base Interest pursuant to Section 2.3(b)) payable, if any, during each of the
first five (5) full calendar years of the Term shall be limited to seven percent
(7%) of the aggregate Interest payable for the prior calendar year, or in the
case of 1997, of the Base Interest pro rated. Borrower's
22
obligation to pay Participating Interest shall be reduced during each Fiscal
Quarter by an amount equal to the increase in the Base Interest over the Initial
Base Interest during such Fiscal Quarter (excluding from such calculation any
such increase attributable to the payment of Additional Base Interest as a
result of additional Loans, but including increases in Base Interest applicable
from time to time as a result of the application of the Base Interest Escalator
to any such Additional Base Interest).
(d) Annual Reconciliation of Participating Interest. Within
sixty (60) days after the end of each Fiscal Year, or after the expiration or
termination of this Agreement, Borrower shall deliver to Lender an Officer's
Certificate setting forth (i) the Gross Revenue for the Fiscal Year just ended,
and (ii) a comparison of the amount of the Participating Interest actually paid
during such Fiscal Year versus the amount of Participating Interest actually
owing on the basis of the annual calculation of the Gross Revenue. If the
Participating Interest for such Fiscal Year exceeds the sum of the quarterly
payments of Participating Interest previously paid by Borrower, Borrower shall
pay such deficiency to Lender along with such Officer's Certificate. If the
Participating Interest for such Fiscal Year is less than the amount of
Participating Interest previously paid by Borrower, Lender shall, at Borrower's
option, either (i) remit to Borrower its funds in an amount equal to such
difference, or (ii) grant Borrower a credit against the payment of Interest next
coming due. Lender shall have the right to audit all of Borrower's business
operations at the Property so as to determine the calculation of Participating
Interest as provided in Section 6.8.
(e) Record-keeping. Borrower shall utilize an accounting
system for the Property in accordance with its usual and customary practices and
in accordance with GAAP which will accurately record all Gross Revenue. Borrower
shall retain all accounting records for each Fiscal Year conforming to such
accounting system until at least five (5) years after the expiration of such
Fiscal Year.
2.4 Tranche II Loan Interest. Borrower will pay to Lender, in
lawful money of the United States of America, Interest until the Tranche II Loan
is repaid in full on the outstanding principal amount of the Tranche II Loan at
a rate per annum equal to the Conversion Date Capitalization Rate. If any
payment owing under this Section 2.4 shall otherwise be due on a day that is not
a Business Day, such payment shall be due on the next succeeding Business Day.
2.5 Additional Charges. In addition to the Base Interest, the
Participating Interest and the Tranche II Interest, (a) Borrower shall also pay
and discharge when due and payable all other amounts, liabilities, obligations
and Impositions which
23
Borrower assumes or agrees to pay under this Agreement, including the Capital
Replacement Reserve, and (b) in the event of any failure on the part of Borrower
to pay any of those items referred to in clause (a) above, Borrower shall also
pay and discharge every fine, penalty, interest and cost which may be added for
non-payment or late payment of such items (the items referred to in clauses (a)
and (b) above being referred to herein collectively as the "Additional
Charges"). Except as otherwise provided in this Agreement, all Additional
Charges shall become due and payable at the earlier of (i) thirty (30) days
after either Lender or the applicable third party delivers an invoice to
Borrower, or (ii) the date of delinquency with respect to Impositions.
2.6 Late Payment of Interest. Borrower hereby acknowledges
that late payment by Borrower to Lender of Base Interest, Participating Interest
or Additional Charges will cause Lender to incur costs not contemplated under
the terms of this Agreement, the exact amount of which is presently anticipated
to be extremely difficult to ascertain. Accordingly, if any installment of
Interest shall not be paid on or before the date such payment is due, Borrower
will pay Lender on demand, as Additional Charges, a late charge equal to the
lesser of five percent (5%) of such late payment or $10,000. The parties agree
that this late charge represents a fair and reasonable estimate of the costs
that Lender will incur by reason of late payment by Borrower and is not a
penalty. In addition, if any installment of Interest or Additional Charges (but
only as to those Additional Charges which are payable directly to Lender) shall
not be paid within five (5) days after the due date with respect to Base
Interest or Participating Interest or delivery of an invoice to Borrower with
respect to the Additional Charge, the amount unpaid shall bear interest, from
such due date to the date of payment thereof, computed at the Overdue Rate on
the amount of such installment, and Borrower will pay such interest to Lender as
Additional Charges. The acceptance of any late charge or interest shall not
constitute a waiver of, nor excuse or cure, any default under this Agreement,
nor prevent Lender from exercising any other rights and remedies available to
Lender.
2.7 No Deductions. All payments of principal or interest under
the Notes shall be made without deduction of any present or future taxes,
levies, imposts, deductions, charges or withholdings, which amounts shall be
paid by Borrower (except as to amounts which are applicable to Lender based on
Lender's specific operations and not generally applicable to similarly situated
lenders). Borrower will pay the amounts necessary such that the gross amount of
the principal and interest received by Lender is not less than that required by
the Notes. If Borrower shall be required by law to deduct any such amounts from
or in respect of any principal or interest payment under the Notes, then (a) the
sum payable to Lender shall be increased as may be necessary so that after
making all required deductions (including
24
deductions applicable to additional sums payable under this provision) Lender
receives an amount equal to the sum it would have received had no deductions
been made, (b) Borrower shall make such deductions, and (c) Borrower shall pay
the full amount deducted to the relevant taxation authority or other authority
in accordance with applicable law. All stamp and documentary taxes shall be paid
by Borrower. If, notwithstanding the foregoing, Lender pays such taxes, Borrower
will reimburse Lender for the amount paid. Borrower will furnish Lender official
tax receipts or other evidence of payment of all taxes within thirty (30) days
following the date upon which such taxes are due and payable.
2.8 Payment of Principal. (a) The Tranche I Loan Amount, or so
much thereof as has been disbursed and remains outstanding under Note A,
together with all unpaid interest accrued thereon, and all other amounts payable
by Borrower with respect to Note A under the terms of the Loan Documents, and
(b) the Tranche II Loan Amount, or so much thereof as has been disbursed and
remains outstanding under Note B, together with all unpaid interest accrued
thereon, and all other amounts payable by Borrower with respect to Note B under
the terms of the Loan Documents, shall be due and payable on the Maturity Date.
2.9 Prepayment. Borrower shall have no right to prepay the
Loans during the first ten years following the Closing Date, except upon a
Transfer Triggering Event. On the tenth (10th) anniversary of the Closing Date,
on each five (5) year anniversary thereafter, and upon a Transfer Triggering
Event, Borrower shall have the right to prepay the Loan, provided each such
prepayment shall (i) include the prepayment amount set forth in Section 10.5,
and (ii) shall be preceded by not less than one hundred eighty (180) days prior
written notice. Following a Transfer Triggering Event, and provided the Loans
are not repaid on such date, Borrower shall no longer be permitted to prepay the
Loans.
2.10 Security. Payment of the Notes shall be secured by the
following:
(a) the Deed of Trust;
(b) the Security Agreement and the Financing
Statement;
(c) the Assignment of Contracts and Permits;
(d) the Pledge Agreement;
(e) the Golf Hosts Guaranty; and
(f) the Payment and Performance Guaranty.
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2.11 Partial Release.
(a) The Pledged Lender's Shares shall be released (and Lender
shall release common stock of GTA Inc. prior to the release of partnership units
of Lender unless otherwise directed by Borrower), and shall no longer constitute
collateral security for the loan, at the following times and in accordance with
the following provisions:
(i) One-third (1/3) of the Pledged Lender's Shares (or
an equivalent dollar amount if held in cash or other
securities) at such time as the Net Operating Income with
respect to the Innisbrook Property shall have been, for each
of the two (2) prior Fiscal Years, at least one hundred
twenty percent (120%) of the Debt Service payable by
Borrower for each such Fiscal Year.
(ii) An aggregate of two-thirds (2/3) of the Pledged
Lender's Shares (or an equivalent dollar amount if held in
cash or other securities) at such time as the Net Operating
Income with respect to the Innisbrook Property shall have
been, for each of the two (2) prior Fiscal Years, at least
one hundred and thirty percent (130%) of Debt Service
payable by Borrower for each such Fiscal Year.
(iii) All of the Pledged Lender's Shares (or an
equivalent dollar amount if held in cash or other
securities) provided that the Net Operating Income with
respect to the Innisbrook Property shall have been, for each
of the two (2) prior Fiscal Years, one hundred and forty
percent (140%) of the Debt Service payable by Borrower for
each such Fiscal Year.
This release of Pledged Lender's Shares shall occur simultaneously with the
circumstances triggering such an adjustment as described above, without the
necessity for any further action on the part of Pledgor or Secured Party (other
than the execution by Secured Party of any documentation of release required
pursuant to the terms of the Pledge Agreement). Notwithstanding the foregoing,
in no event shall any of the Pledged Lender's Shares be released until prior to
the expiration of Lender's obligation to make disbursements of the Tranche II
Loan, including without limitation, termination of such obligation at Borrower's
election, in its sole discretion.
(b) The Additional Collateral shall be released, and shall no
longer constitute collateral security for the Loans, on the date that the
audited financial statements delivered pursuant to Section 6.10(c) demonstrate
that the ratio of the Net Operating Income of the Innisbrook Property during
such year (after required funding of the Capital Replacement Fund) to Debt
Service, is equal to or greater than 1.135 to 1.00 on a trailing
26
twelve (12) months basis, and Borrower has provided an Officer's Certificate to
Lender certifying to that effect (such date, the "Release Date"). In addition,
on the Release Date the Payment and Performance Guaranty and the Golf Hosts
Guaranty and all of the obligations thereunder shall terminate and be of no
further effect. Subject to the terms of the last sentence of the succeeding
subparagraph, Borrower shall have the continuing right to cause the Tamarron
Premises to be released prior to the Release Date upon delivery to Lender of
$250,000, which amount shall be held by Lender as Additional Collateral pursuant
to the terms of this Agreement.
(c) Borrower shall be permitted to sell, transfer, encumber,
pledge or otherwise dispose of any portion of the Additional Collateral subject
to the requirements of this subparagraph. The proceeds of any Additional
Collateral shall be invested in Collateral, Additional Collateral or, to the
extent not included within the Additional Collateral, the Innisbrook Premises or
held by Lender as Additional Collateral pursuant to arrangements reasonably
acceptable to Lender, all as more particularly set forth in the Security
Agreement. Provided no Event of Default or Potential Event of Default then
exists hereunder, Lender shall execute any and all necessary release documents
to evidence such release upon receipt by Lender of an Officer's Certificate
certifying to Lender that (i) such property is being sold or, with respect to
any Lender's Shares, pledged, to a third-party unrelated to Borrower or any
affiliate of Borrower or any affiliate of any officer, director or employee of
Borrower or any affiliate of Borrower, or if an affiliate, identifying the
affiliate relationship, (ii) the transaction was undertaken in good faith and on
an arm's length basis, and (iii) the property is being sold or transferred for
consideration that equals or exceeds eighty percent (80%) of the property's fair
market value (ninety-five percent (95%) if the property is being sold to an
affiliate). Without limiting the foregoing, in the event the Tamarron Property
is sold or refinanced prior to the Release Date, the net proceeds therefrom,
after repayment of the Permitted Exceptions, shall be considered Additional
Collateral.
ARTICLE III
LOAN CLOSING
Lender's obligation to make the Loans and to perform the
remainder of its obligations under this Agreement are expressly conditioned upon
the occurrence of all of the following on or before the Termination Date:
3.1 Loan Documents. Borrower's delivery to Lender of the
following documents, in form and substance satisfactory to Lender, duly executed
(and acknowledged where necessary) by the appropriate parties thereto:
(a) This Agreement;
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(b) The Notes;
(c) The Deed of Trust, which shall be duly recorded in such
Official Records as are acceptable to Lender;
(d) The Security Agreement, together with the Financing
Statement which shall be duly filed in the Office of the Florida
Secretary of State and the Office of the Colorado Secretary of State;
(e) The Assignment of Contracts and Permits;
(f) The Securities Purchase Agreement;
(g) The Pledge Agreement;
(h) The Payment and Performance Guaranty; and
(i) The Golf Hosts Guaranty.
3.2 Borrower's Deliveries. Borrower shall have delivered to or
for the benefit of Lender, as the case may be, on or before the Closing Date,
all other documents and other information required of Borrower pursuant to this
Agreement.
3.3 Representations, Warranties and Covenants. All of
Borrower's representations and warranties made in this Agreement shall be true
and correct as of the Closing Date as if then made, and there shall have
occurred no material adverse change in the condition or financial results of the
operation of the Property since January 1, 1997. Borrower shall have performed
all of its covenants and other obligations under this Agreement and Borrower
shall have executed and delivered to Lender on the Closing Date a certificate
dated as of the Closing Date to the foregoing effect in the form attached hereto
as Exhibit O.
3.4 Title Insurance. The Title Company shall have delivered
the Lender's Title Policy to Lender.
3.5 Title to Property. Lender shall have determined that
Borrower is the sole owner of good and marketable fee simple title to the Real
Property and to the Tangible Personal Property, free and clear of all liens,
encumbrances, restrictions, conditions and agreements except for Permitted
Exceptions as evidenced by issuance of the Lender's Title Policy.
3.6 Condition of Property. The Real Property and the Tangible
Personal Property (including but not limited to the golf course, driving range,
putting greens, mechanical systems, plumbing, electrical wiring, appliances,
fixtures, heating, air conditioning and ventilating equipment, elevators,
boilers,
28
equipment, roofs, structural members and furnaces) shall be in condition
acceptable to Lender.
3.7 Utilities. All of the Utilities shall be installed in and
operating at the Property, and service shall be available for the removal of
garbage and other waste from the Property.
3.8 Liquor License. Borrower, or Borrower's nominee, shall
possess all liquor licenses, alcoholic beverage licenses and other material
Permits and Authorizations necessary to operate the restaurant, bars, snack
shops and lounges presently located at the Property.
3.9 Partnership Agreement. Borrower shall have delivered to
Lender a countersigned copy of the Partnership Agreement of Lender in a form
prepared by Lender, which shall be in substantially the form attached hereto as
Exhibit P.
3.10 Certification of Non-Foreign Status. Borrower shall have
delivered to Lender a duly executed Certification of Non-Foreign Status.
3.11 Legal Opinions. Borrower shall have delivered to Lender a
favorable opinion of Borrower's Counsel in the form attached hereto as Exhibit
H.
3.12 Satisfaction or Waiver of Conditions Precedent to Merger
Agreement. Borrower shall provide Lender with written certification that each of
the conditions precedent set forth in Article IX of the Merger Agreement have
been satisfied or waived by Borrower.
Each of the conditions and additional covenants contained in this Section are
intended for the benefit of Lender and may be waived in whole or in part by
Lender, but only by an instrument in writing signed by Lender.
ARTICLE IV
DISBURSEMENTS OF THE LOAN
4.1 Disbursement on Closing Date . Lender shall disburse Loan
proceeds in the principal amount of Sixty-Nine Million Nine Hundred Seventy-Five
Thousand Dollars ($69,975,000) on the Closing Date, together with Tranche I
Capital Expenditures incurred prior to the Closing Date for improvements to the
Sandpiper golf course.
4.2 Requests for Subsequent Disbursements of the Tranche I
Loan. Borrower shall request disbursements of the Tranche I Loan for the Tranche
I Capital Expenditures not more frequently than monthly and not closer together
than fifteen (15) days after the date on which the immediately preceding
29
disbursement request was submitted to Lender. Upon satisfaction of the following
conditions precedent:
(a) Lender has received and approved true, correct and
complete copies of all of the items listed in Part I of Exhibit G, including the
Draw Request Documents; and
(b) Borrower shall have evidenced to Lender's reasonable
satisfaction that the cost to complete the improvements to made with such
disbursements, together with the undisbursed loan proceeds and any funds
separately set aside by Borrower, are sufficient to complete such work:
(c) No Event of Default or Potential Default shall have
occurred and be continuing; and
(d) Lender has received an endorsement or endorsements to the
Lender's Title Policy reasonably satisfactory to the Lender in connection with
the additional advance requested.
Lender shall disburse within ten (10) Business Days after receipt of the Draw
Request Documents, the Loan disbursement of the Tranche I Loan requested by
Borrower therein; provided, however, that in no event shall the aggregate amount
disbursed by Lender pursuant to this Section 4.2 exceed Nine Million Dollars
($9,000,000).
4.3 Requests for Subsequent Disbursements of the Tranche II
Loan. Borrower shall request disbursements of the Tranche II Loan in accordance
with the procedures set forth in the Securities Purchase Agreement and upon
satisfaction of the following conditions precedent:
(a) no Event of Default or Potential Default shall have
occurred and be continuing; and
(b) Lender has received an endorsement or endorsements to the
Lender's Title Policy reasonably satisfactory to the Lender in connection with
the additional advance requested.
In no event shall the aggregate amount disbursed by Lender pursuant to this
Section 4.3 exceed the Purchase Price for the Contingent Additional OP Units on
the Conversion Date.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into this Agreement, Borrower hereby
makes the following representations, warranties and covenants with respect to
the Property, subject to the Warranty Disclosure Schedule attached hereto as
Exhibit R, upon each of
30
which Borrower acknowledges and agrees that Lender is entitled to rely and has
relied:
5.1 Organization and Power. Borrower is duly formed or
organized, validly existing and in good standing under the laws of the state of
its formation and is qualified to transact business in the State and has all
requisite powers and all governmental licenses, authorizations, consents and
approvals to carry on its business as now conducted and to enter into and
perform its obligations hereunder and under any document or instrument required
to be executed and delivered by or on behalf of Borrower hereunder.
5.2 Authorization and Execution. This Agreement has been, and
each of the agreements and certificates of Borrower to be delivered to Lender on
the Closing Date as provided in Article IV will be, duly authorized by all
necessary action on the part of Borrower, has been duly executed and delivered
by Borrower, constitutes the valid and binding agreement of Borrower and is
enforceable against Borrower in accordance with its terms, subject, in each
case, to applicable bankruptcy, insolvency, moratorium or similar laws in effect
from time to time. There is no other person or entity whose consent is required
in connection with Borrower's performance of its obligations hereunder which
consent has not been received or obtained. All action required pursuant to this
Agreement necessary to effectuate the transactions contemplated herein has been,
or will on the Closing Date be, taken promptly and in good faith by Borrower and
its representatives and agents.
5.3 Noncontravention. The execution and delivery of, and the
performance by Borrower of its obligations under, this Agreement do not and will
not contravene, or constitute a default under, any provision of applicable law
or regulation, Borrower's Organizational Documents or any agreement, judgment,
injunction, order, decree or other instrument binding upon Borrower, or result
in the creation of any lien or other encumbrance on any asset of Borrower other
than as set forth in this Agreement or which otherwise have no material adverse
effect on the use and operation of the Property. There are no outstanding
agreements (written or oral) pursuant to which Borrower (or any predecessor to
or representative of Borrower) has agreed to contribute or has granted an option
or right of first refusal to purchase the Property or any part thereof (other
than in favor of Lender as set forth in Article XI). There are no purchase
contracts, options or other agreements of any kind, written or oral, recorded or
unrecorded, whereby any person or entity other than Borrower will have acquired
or will have any basis to assert any right, title or interest in, or right to
possession, use, enjoyment or proceeds of, all or any portion of the Property
except as set forth on the Lender's Title Policy or which otherwise have no
material adverse effect on the use and operation of the Property. There are no
rights, subscriptions,
31
warrants, options, conversion rights or agreements of any kind outstanding to
purchase or to otherwise acquire any interest or profit participation of any
kind in the Property or any part thereof other than as set forth in this
Agreement or which otherwise have no material adverse effect on the use and
operation of the Property.
5.4 No Special Taxes. Borrower has no knowledge of, nor has it
received any notice of, any special taxes or assessments relating to the
Property or any part thereof, including taxes relating to the business of the
Property, or any planned public improvements that may result in a special tax or
assessment against the Property, that are not otherwise disclosed in the
Lender's Title Policy. To the best of Borrower's knowledge, there is not any
proposed increase in the assessed valuation of the Real Property for tax
purposes.
5.5 Compliance with Existing Laws. Borrower possesses all
Authorizations, each of which is valid and in full force and effect, and no
provision, condition or limitation of any of the Authorizations has been
breached or violated, except where the failure to possess such Authorizations
would not have a material adverse effect on the operations of the Property.
Borrower has not misrepresented or failed to disclose any material relevant fact
in obtaining all Authorizations, and Borrower has no knowledge of any change in
the circumstances under which any of those Authorizations were obtained that
result in their termination, suspension, modification or limitation. Borrower
has not taken any action (or failed to take any action), the omission of which
would result in the revocation of any of the Authorizations. Borrower has no
knowledge, nor has it received notice within the past three years, of any
material existing or threatened violation of any provision of any applicable
building, zoning, subdivision, environmental or other governmental ordinance,
resolution, statute, rule, order or regulation, including but not limited to
those of environmental agencies or insurance boards of underwriters, with
respect to the ownership, operation, use, maintenance or condition of the
Property or any part thereof, or requiring any material repairs or alterations
other than those that have been made prior to the date hereof which might have a
material adverse effect on the ownership or operation of the Property.
5.6 Real Property. To the best of Borrower's knowledge, (i)
the Improvements conform in all material respects to all legal requirements,
(ii) all easements necessary or appropriate for the use or operation of the
Property have been obtained, (iii) all contractors and subcontractors retained
by Borrower who have performed work on or supplied materials to the Property
have been fully paid, and all materials used at or on the Property have been
fully paid for, (iv) the Improvements have been completed in all material
respects in a workmanlike manner of first-class quality, and (v) all equipment
necessary or
32
appropriate for the use or operation of the Property has been installed and is
presently operative in good working order. Borrower has not received any written
notice which is still in effect that there is, and, to the best of Borrower's
knowledge, there does not exist, any material violation of a condition or
agreement contained in any easement, restrictive covenant or any similar
instrument or agreement effecting the Real Property, or any portion thereof.
5.7 Personal Property. All of the Tangible Personal Property
and Intangible Personal Property being conveyed by Borrower to Lender is free
and clear of all liens and encumbrances on the Closing Date, other than liens
and encumbrances specifically permitted by this Agreement, and Borrower has
good, merchantable title thereto and the right to convey same in accordance with
the terms of this Agreement.
5.8 Warranties and Guaranties. Borrower shall not before or
after the Closing Date, release or materially modify in a manner adverse to
Borrower any warranties or guarantees, if any, of manufacturers, suppliers and
installers relating to the Improvements and the Personal Property or any part
thereof, except with the prior written consent of Lender.
5.9 Insurance. All of Borrower's insurance policies are valid
and in full force and effect, all premiums for such policies were paid when due
and all future premiums for such policies (and any replacements thereof) shall
be paid by Borrower on or before the due date therefor. Borrower shall pay all
premiums on, and shall not cancel or voluntarily allow to expire, any of
Borrower's insurance policies unless such policy is replaced, without any lapse
of coverage, by another policy or policies providing coverage at least as
extensive as the policy or policies being replaced. Borrower has not received
any notice from any insurance company of any defect or inadequacies in the
Property to any part thereof which would adversely affect the insurability of
the Property, or which would increase the cost of insurance beyond that which
would ordinarily and customarily be charged for similar properties in the
vicinity of the Real Property. The Property is fully insured in accordance with
the requirements of Section 7.1.
5.10 Condemnation Proceedings; Roadways. Borrower has received
no notice of any condemnation or eminent domain proceeding pending or threatened
against the Property or any part thereof. Borrower has no knowledge of any
change or proposed change in the route, grade or width of, or otherwise
affecting, any street or road adjacent to or serving the Property which would
materially adversely affect the Property. To the best of Borrower's knowledge,
no fact or condition exists which would result in the termination or material
impairment of access to the Property from adjoining public or private streets or
ways or which could result in discontinuation of presently available or
33
otherwise necessary sewer, water, electric, gas, telephone or other utilities or
services.
5.11 Litigation. Except as disclosed in writing to Borrower,
there is no action, suit or proceeding pending or known to be threatened against
or affecting Borrower or any of its properties in any court, before any
arbitrator or before or by any federal state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign which reasonably could be expected to (a) in any manner raise any
question affecting the validity or enforceability of this Agreement or any other
agreement executed in connection herewith, (b) materially and adversely affect
the business, financial position or results of operations of Borrower, (c)
materially and adversely affect the ability of Borrower to perform its
obligations hereunder, or under any document to be delivered pursuant hereto,
(d) create a lien on the Property, any part thereof or any interest therein in
violation of the terms of this Agreement, (e) otherwise adversely materially
affect the Property, any part thereof or any interest therein or the use,
operation, condition or occupancy thereof.
5.12 Labor Disputes and Agreements. There are no labor
disputes pending or, to the best of Borrower's knowledge, threatened as to the
operation or maintenance of the Property or any part thereof which could
reasonably be expected to adversely materially affect the Property, any part
thereof or any interest therein or the use, operation, condition or occupancy
thereof. Borrower is not a party to any union or other collective bargaining
agreement with employees employed in connection with the ownership, operation or
maintenance of the Property. Borrower is not a party to any employment contracts
or agreements, other than the Employment Agreements, and Borrower will not,
between the date hereof and the Closing Date, enter into any new employment
contracts or agreements, amend any existing Employment Agreement, except in the
ordinary course of the operations of the Property. To the best of Borrower's
knowledge, Borrower has complied with the requirements of the federal
Immigration and Reform Control Act respecting the employment of undocumented
workers.
5.13 Financial Information. To the best of Borrower's
knowledge, all of Borrower's financial information, including all books and
records and financial statements, is correct and complete in all material
respects and presents and will present accurately the results of the operations
of the Property for the periods indicated.
5.14 Organizational Documents. Borrower's Organizational
Documents are in full force and effect and have not been modified or
supplemented, and no fact or circumstance has occurred that, by itself or with
the giving of notice or the passage of time or both, would constitute a default
thereunder.
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5.15 Land Use. The current use and occupancy of the Property
for golfing, hospitality and all other related purposes (including the sale of
merchandise and food and beverages) do not require any special use permit,
special exception or other special permit, permission or consent which has not
been obtained, and Borrower is not aware of any proposal to change or restrict
such use. Borrower has all necessary certificates of occupancy or completion to
operate the Property as presently operated.
5.16 Hazardous Materials. Except as may be disclosed in the
Phase I environmental assessment report for the Property, to the best of
Borrower's knowledge, (i) no Hazardous Materials are located on (except in
immaterial amounts used in the ordinary course for the operation or maintenance
of the Property by Borrower in accordance with all applicable laws), in or under
the Property or have been released into the environment, or discharged, placed
or disposed of at, on or under the Property except in accordance with applicable
law; and (ii) no underground storage tanks are located at the Property except in
accordance with applicable law. To the best of Borrower's knowledge, there
currently exist no facts or circumstances that could reasonably be expected to
give rise to a material non-compliance with Environmental Laws, material
environmental liability or material environmental claim.
5.17 Utilities. All Utilities required for the operation of
the Property either enter the Property through adjoining streets, or they pass
through adjoining land and do so in accordance with valid public easements or
private easements, and all of said Utilities are installed and are in good
working order and repair and operating as necessary for the operation of the
Property and all installation and connection charges therefor have been paid in
full. The sewage, sanitation, plumbing, water retention and detention, refuse
disposal and utility facilities in and on and/or servicing the Real Property are
adequate to service the Real Property as it is currently being used and the Real
Property's utilization of such facilities is in material compliance with all
applicable governmental and environmental protection authorities' laws, rules,
regulations and requirements.
5.18 Curb Cuts. All curb cut street opening permits or
licenses required for vehicular access to and from the Property from any
adjoining public street have been obtained and paid for and are in full force
and effect.
5.19 Leased Property. The Personal Property identified on
Exhibit S is all of the material leased property at the Property, and such
exhibit reflects the date of each such lease, the name of the lessor, the name
of the lessee, the term of each such lease, the lease payment terms and a
description of the property demised by each such lease. To the best of
Borrower's
35
knowledge, all leases of such property are in good standing and free from any
material default.
5.20 Defects and Hazards. Borrower does not know of any
defects, facts or conditions affecting the Real Property that would make it
unsuitable for the use contemplated hereunder or of any earth movement or
slippage affecting the Real Property.
5.21 Principal Place of Business. Borrower's principal place
of business is in the State of Florida at the address set forth in the preamble
hereof. Borrower does not do business under any trade name or fictitious
business names other than Golf Hosts, Inc., Golf Host Resorts, Inc., Golf Host
Development, Inc. and Golf Host Securities, Inc.
5.22 Single Purpose Entity. Borrower (a) shall not engage,
directly or indirectly, in any business or venture other than the ownership of
the Property and (b) is not and shall not become liable on any guaranty for the
obligations of another person or entity and has not pledged any of its assets
except pursuant to or permitted by the Loan Documents. Borrower shall maintain
and preserve its respective existence and all rights and franchises material to
its business. Prior to the release of the Additional Collateral, Borrower shall
evidence that the property to be released shall thereafter be owned and operated
by a legal entity separate and apart from Borrower.
5.23 Removal of Collateral. Except as otherwise provided
herein and as provided in the Annual Budget, the Tangible Property will be kept
on or at the Real Property and Borrower will not, without the prior written
consent of Lender, remove any material portion of the Collateral therefrom
except such portions or items of Collateral which are consumed or worn out in
ordinary usage, all of which shall be promptly replaced by Borrower with
collateral of similar nature and of equal or greater value.
5.24 Rights in Escrow Account. Borrower shall grant, or cause
to be granted, to Lender, to the extent permitted by law, a perfected first lien
security interest in the rights of Borrower or Borrower's Affiliate, into the
proceeds payable, if any, to Borrower or Borrower's Affiliate under the Escrow
Account, as such term is defined in the Merger Agreement; provided Lender
acknowledges and agrees that such right shall be subordinate and subject to the
rights of the parties to the escrow, including the escrow holder.
5.25 Notices Under Merger Agreement. From and after the date
hereof Borrower shall deliver to lender copies of all written notices given by
or to Borrower (or Golf Hosts, Inc.) under the Merger Agreement promptly, but in
no event later than Ten (10) Business Days of the date such notices are received
or sent.
36
Each of the representations, warranties and covenants
contained in this Article III are intended for the benefit of Lender. Each of
said representations, warranties and covenants shall survive the Closing Date.
No investigation, audit, inspection, review or the like conducted by or on
behalf of Lender shall be deemed to terminate the effect of any such
representations, warranties and covenants, it being understood that Lender has
the right to rely thereon and that each such representation, warranty and
covenant constitutes a material inducement to Lender to execute this Agreement
and to close the transaction contemplated hereby
ARTICLE VI
COVENANTS OF BORROWER
As an inducement to Lender to execute this Agreement and to
make each disbursement of the Loan, Borrower hereby covenants as set forth in
this Article VI.
6.1 Obligation to Withhold Distributions. If the ratio of (a)
the Net Operating Income (after payment of any required deposit into the Capital
Replacement Fund) for the Innisbrook Property to (b) Debt Service falls below
1.20 to 1.00, at any time following the release of any Pledged Lender's Shares
(or securities held by Lender in lieu thereof), then Borrower shall thereafter
retain, and not make dividends or distributions (except as may be necessary to
pay any applicable taxes attributable to the income of Borrower) to its
shareholders, partners or members, as applicable, until such time as Borrower
has accumulated six (6) months of Base Interest at the then current level. Such
accumulated Base Interest shall be maintained at all times until Borrower has
again maintained such coverage ratios for two (2) consecutive Fiscal Years.
Borrower shall provide Lender with such documentation, including Officer's
Certificates, within forty-five (45) days after the end of each Fiscal Quarter
as are necessary to establish Borrower's compliance with the foregoing
requirements.
6.2 Impositions.
(a) Payment of Impositions. Borrower will pay, or cause to be
paid, all Impositions before any fine, penalty, interest or cost may be added
for non-payment, such payments to be made directly to the taxing authorities
where feasible. All payments of Impositions shall be subject to Borrower's right
of contest pursuant to the provisions of Section 6.12. Upon request, Borrower
shall promptly furnish to Lender copies of official receipts, if available, or
other satisfactory proof evidencing such payments, such as cancelled checks.
(b) Information and Reporting. Lender shall give prompt notice
to Borrower of all Impositions payable by Borrower hereunder of which Lender at
any time has actual knowledge, but
37
Lender's failure to give any such notice shall in no way diminish Borrower's
obligations hereunder to pay such Impositions. Lender and Borrower shall, upon
reasonable request of the other, provide such data as is maintained by the party
to whom the request is made with respect to the Property as may be necessary to
prepare any required returns and reports. In the event any applicable
governmental authorities classify any property covered by this Agreement as
personal property, Borrower shall file all personal property tax returns in such
jurisdictions where it must legally so file. Each party, to the extent it
possesses the same, will provide the other party, upon reasonable request, with
cost and depreciation records necessary for filing returns for any property so
classified as personal property.
(c) Refunds. If any refund shall be due from any taxing
authority in respect of any Imposition paid by Borrower, the same shall be paid
over to or retained by Borrower if no Event of Default shall have occurred
hereunder and be continuing. Any such funds retained by Lender due to an Event
of Default shall be applied to the obligations of Borrower to Lender in such
order as Lender may elect in its sole discretion.
(d) Utility Charges. Borrower shall pay or cause to be paid
prior to delinquency charges for all utilities and services, including
electricity, telephone, trash disposal, gas, oil, water, sewer, communication
and all other utilities used in the Property during the Term.
(e) Assessment Districts. Borrower shall not voluntarily
consent to or agree in writing to (i) any special assessment or (ii) the
inclusion of any material portion of the Property into a special assessment
district or other taxing jurisdiction unless Lender shall have consented
thereto, which consent shall not be unreasonably withheld or delayed, or unless
Borrower agrees to pay the cost thereof prior to the Maturity Date.
6.3 Maintenance of the Collateral.
(a) Maintenance of Property. Borrower shall maintain all of
the Property necessary for the operation of Borrower's business, whether now
existing or hereafter acquired by Borrower, in good condition and repair, normal
wear and tear excepted. Upon the loss, destruction or obsolescence of any
Tangible Personal Property, Borrower shall replace such property with
replacements of the same type and quality as initially in place. If any of such
Tangible Personal Property is stored away from the Property, Borrower will
provide Lender with proper access to the storage facility.
(b) Borrower's Obligations. Borrower shall provide and
maintain, or cause to be provided and maintained, during the Term, all Tangible
Personal Property, as well as
38
merchandise for sale to the public, and food and beverage, as shall be necessary
in order to operate the Property in compliance with (a) all applicable Legal
Requirements, (b) customary practices in the golf industry, and (c) the
requirements of this Agreement.
6.4 Use of Property.
(a) Use. After the Closing Date and during the Term, Borrower
shall use or cause to be used the Property and the Improvements for its Primary
Intended Use and shall operate the Property to maximize its long-term value.
Borrower shall not use the Property or any portion thereof for any other use
without the prior written consent of Lender, in Lender's absolute discretion. No
use shall be made or permitted to be made of the Property, and no acts shall be
done, which will cause the cancellation of any insurance policy covering the
Property or any part thereof, nor shall Borrower sell or otherwise provide to
patrons, or permit to be kept, used or sold in or about the Property any article
which may be prohibited by law or by the standard form of fire insurance
policies, or any other insurance policies required to be carried hereunder, or
fire underwriters regulations. Borrower shall, at its sole cost, comply with all
of the requirements pertaining to the Property or other improvements of any
insurance board, association, organization or company necessary for the
maintenance of insurance, as herein provided, covering the Property. Lender
specifically consents to the proposed reconfiguration of the existing holes
adjacent to one of the driving ranges at the Innisbrook Property and the
construction of condominiums, homesites or homes, all as more particularly
described on Exhibit Q attached hereto. In addition, Borrower shall have the
right to relocate or reconfigure or eliminate the existing Island Course driving
range at the Innisbrook Property provided the same does not adversely affect the
long-term value of the Innisbrook Property.
(b) Specific Prohibited Uses. Borrower shall not use or occupy
or permit the Property to be used or occupied, nor do or permit anything to be
done in or on the Property, in a manner which would (i) violate or fail to
comply with any law, rule or regulation or Legal Requirement, (ii) cause
structural injury to any of the Improvements or (iii) constitute a public or
private nuisance or waste. Borrower shall not allow any Hazardous Material to be
located in, on or under the Property, or any adjacent property, or incorporated
in the Property or any improvements thereon except in compliance with applicable
law (including any Environmental Laws). Borrower shall not allow the Property to
be used as a landfill or a waste disposal site, or a manufacturing, distribution
or disposal facility for any Hazardous Materials. Borrower shall neither suffer
nor permit the Property or any portion thereof to be used in such a manner as
(i) might reasonably tend to impair Lender's title thereto or to any portion
thereof, or (ii) may reasonably make possible a
39
claim or claims of adverse usage or adverse possession by the public, as such,
or of implied dedication of the Property or any portion thereof, or (iii) is in
material violation of any applicable Environmental Law.
(c) Membership Sales. Borrower shall not sell and/or classify
or reclassify memberships, or set initiation fees or other charges which results
in a reduction in the individual membership dues payable by members at the
Innisbrook Property without the consent of the Lender, which consent shall not
be unreasonably withheld or delayed. In addition, Borrower shall not materially
increase the number of golfing memberships in any calendar year at the
Innisbrook Property if such sales would diminish the long-term value of the
Property.
(d) Grant of Easements, Etc. Borrower may, from time to time,
so long as no Event of Default has occurred and is continuing, at Borrower's
cost and expense: (i) grant easements and other rights in the nature of
easements; (ii) release existing easements or other rights in the nature of
easements which are for the benefit of the Property; (iii) dedicate or transfer
unimproved portions of the Property for road, highway or other public purposes;
(iv) execute petitions to have the Property annexed to any municipal corporation
or utility district; (v) execute amendments to any covenants and restrictions
affecting the Property; and (vi) execute and deliver to any person any
instrument appropriate to confirm or effect such grants, releases, dedications
and transfers (to the extent of its interest in the Property), but only upon
delivery to Lender of an Officer's Certificate (which Officer's Certificate, if
contested by Lender, shall not be binding on Lender) stating that such grant,
release, dedication, transfer, petition or amendment is not detrimental to the
proper conduct of the business of Borrower on the Property and does not
materially reduce its value or usefulness for the Primary Intended Use. Borrower
shall not grant, release, dedicate or execute any of the foregoing items in this
Section 6.4(d) without obtaining Lender's prior written approval, which approval
shall not be unreasonably withheld or delayed; provided no such approvals shall
be required for Borrower to grant easements in the normal course of operations
and which do not materially adversely affect the value of the Property.
(e) Borrower's Additional Covenants as to Use. Borrower shall
(a) join the Advisory Association and cooperate in the reasonable activities of
such association; and (b) at its election, engage in reasonable cross-marketing
endeavors with the members of the Advisory Association.
6.5 Hazardous Materials.
(a) Remediation. If Borrower becomes aware of the presence of
any Hazardous Material in a quantity sufficient to
40
require remediation or reporting under any Environmental Law in, on or under any
portion of the Property or if Borrower, Lender, or any portion of the Property
becomes subject to any order of any federal, state or local agency to
investigate, remove, remediate, repair, close, detoxify, decontaminate or
otherwise clean up any portion of the Property, Borrower shall, at its sole
expense, but subject to the last sentence of Section 6.5(b), carry out and
complete any required investigation, removal, remediation, repair, closure,
detoxification, decontamination or other cleanup of the Property. If Borrower
fails to implement and diligently pursue any such repair, closure,
detoxification, decontamination or other cleanup of the Property in a timely
manner, Lender shall have the right, but not the obligation, to carry out such
action and to recover its costs and expenses therefor from Borrower as
Additional Charges.
(b) Borrower's Indemnification of Lender. Borrower shall pay,
protect, indemnify, save, hold harmless and defend Lender, the Company,
Affiliates of the Company and Lender (including their respective officers,
directors and controlling persons), and any Lender Assignee (collectively, the
"Lender Indemnitees") from and against all liabilities, obligations, claims,
damages (including punitive or consequential damages), penalties, causes of
action, demands, judgments, costs and expenses (including reasonable attorneys'
fees and expenses), to the extent permitted by law, imposed upon or incurred by
or asserted against Lender or any other Lender Indemnitee or the Property by
reason of any Environmental Law (irrespective of whether there has occurred any
violation of any Environmental Law) in respect of the Property howsoever
arising, without regard to fault on the part of Borrower, including (a)
liability for response costs and for costs of removal and remedial action
incurred by the United States Government, any state or local governmental unit
to any other Person, or damages from injury to or destruction or loss of natural
resources, including the reasonable costs of assessing such injury, destruction
or loss, incurred pursuant to any Environmental Law, (b) liability for costs and
expenses of abatement, investigation, removal, remediation, correction or
clean-up, fines, damages, response costs or penalties which arise from the
provisions of any Environmental Law, (c) liability for personal injury or
property damage arising under any statutory or common-law tort theory, including
damages assessed for the maintenance of a public or private nuisance or for
carrying on of a dangerous activity, or (d) by reason of a breach of a
representation or warranty of this Agreement. Notwithstanding the foregoing or
any other provision of this Agreement (including Section 6.5(d) and Article 12),
Borrower shall not be liable, or otherwise be required to indemnify Lender or
any Lender Indemnitee for any matters or events that arise after the Closing
Date that are caused by a breach by Lender of the terms of this Agreement.
41
(c) Survival of Indemnification Obligations. Borrower's
obligations and/or liability under this Section 6.5 arising during the Term
shall survive any termination of this Agreement.
(d) Environmental Violations at Expiration or Termination of
Agreement. Notwithstanding any other provision of this Agreement (except the
last sentence of Section 6.5(b)), if, at a time when the Term would otherwise
terminate or expire, a violation of any Environmental Law has been asserted by
Lender and has not been resolved in a manner reasonably satisfactory to Lender,
or has been acknowledged by Borrower to exist or has been found to exist at the
Property or has been asserted by any governmental authority and Borrower's
failure to have completed all action required to correct, abate or remediate
such a violation of any Environmental Law materially impairs the value or
leaseability of the Property upon the expiration of the Term, then, at the
option of Lender, the Purchase Option shall be automatically extended with
respect to the Property beyond the date of termination or expiration until the
earlier to occur of (i) the completion of all remedial action in accordance with
applicable Environmental Laws or (ii) 12 months beyond such expiration or
termination date.
(e) Environmental Statements. Immediately upon Borrower's
learning, or having reasonable cause to believe, that any Hazardous Material in
a quantity sufficient to require remediation or reporting under applicable law
is located in, on or under the Property or any adjacent property, Borrower shall
notify Lender in writing of (a) the existence of any such Hazardous Material;
(b) any enforcement, cleanup, removal, or other governmental or regulatory
action instituted, completed or threatened; (c) any claim made or threatened by
any Person against Borrower or the Property relating to damage, contribution,
cost recovery, compensation, loss, or injury resulting from or claimed to result
from any Hazardous Material; and (d) any reports made to any federal, state or
local environmental agency arising out of or in connection with any Hazardous
Material in or removed from the Property, including any complaints, notices,
warnings or asserted violations in connection therewith.
6.6 Maintenance and Repair.
(a) Borrower's Obligations. Borrower, at its expense, will
operate and maintain the Property in good order, repair and appearance (whether
or not the need for such repairs occurs as a result of Borrower's use, any prior
use, the elements or the age of the Property or any portion thereof) and in
accordance with any applicable Legal Requirements, and, except as otherwise
provided in Article VII, with reasonable promptness, make all necessary and
appropriate repairs thereto of every kind and nature, whether interior or
exterior, structural or non-structural, ordinary or extraordinary, foreseen or
unforeseen or arising by reason of a condition existing prior to the Closing
Date (concealed or otherwise). Borrower shall maintain the Property in
accordance with the maintenance practices of the Property at the Closing Date
and otherwise in a manner comparable to other comparable golf courses (including
the related resort and conference facilities) in the vicinity of the Property.
Lender may consult with the Advisory Association from time to time with respect
to Borrower's compliance with its maintenance and operation obligations under
this Section 6.6(a), and Lender and representatives of Advisory Association
shall have the right from time to time to enter the Property for the purpose of
inspecting the Property. If Lender, in consultation with the Advisory
Association, determines that Borrower has failed to comply with its maintenance
obligations under this Section 6.6(a), Lender shall provide written notice to
Borrower setting forth a list of remedial work and/or steps to be performed by
Borrower. Borrower shall promptly and diligently perform such remedial work
and/or steps as recommended by Lender, provided if Borrower objects to one or
more of the remedial obligations proposed by Lender, then the matter shall be
submitted to the dispute resolution procedure set forth in Article XIII.
Borrower will not take or omit to take any action the taking or omission of
which could reasonably be expected to impair the value or the usefulness of the
Property or any part thereof for its Primary Intended Use. In no event shall
Borrower be deemed to be in violation of this Section 6.6(a) if Borrower has
requested that Lender disburse available funds from the Capital Replacement
Reserve to cure such default by making capital repairs, improvements or
replacements and Lender has not consented to such disbursement.
(b) Mechanic's Liens. Nothing contained in this Agreement and
no action or inaction by Lender shall be construed as (i) constituting the
consent or request of Lender expressed or implied, to any contractor,
subcontractor, laborer, materialman or vendor to or for the performance of any
labor or services or the furnishing of any materials or other property for the
construction, alteration, addition, repair or demolition of or to the Property
or any part thereof; or (ii) giving Borrower any right, power or permission to
contract for or permit the performance of any labor or services or the
furnishing of any materials or other property, in either case, in such fashion
as would permit the making of any claim against Lender in respect thereof or to
make any agreement that may create, or in any way be the basis for, any right,
title, interest, lien, claim or other encumbrance upon the estate of Lender in
the Property, or any portion thereof.
6.7 Borrower's Right to Modify Property.
(a) Borrower's Right to Construct. Subject to the prior
written approval of Lender in its reasonable
42
discretion, during the Term Borrower may make alterations, additions, changes
and/or improvements to the Innisbrook Property (individually, a "Borrower
Improvement," and collectively, "Borrower Improvements"), provided any Borrower
Improvements costing $250,000 or less shall not require the approval of Lender.
Any such Borrower Improvement shall be made at Borrower's sole expense and shall
not affect Lender's option to purchase the Innisbrook Property pursuant to the
terms of Article XI. Unless made on an emergency basis to prevent injury to
Person or property, Borrower will submit plans and specifications for any
Borrower Improvements, in the form necessary for any required building permits,
to Lender for Lender's prior written approval, such approval not to be
unreasonably withheld or delayed and shall not be withheld so long as such
alterations, additions, changes and/or improvements do not have a material
adverse affect on the value of the Innisbrook Property. Borrower shall not
modify any of the Additional Collateral so as to materially diminish the value
thereof or materially diminish the value of the Innisbrook Property. Borrower
may make alterations, additions, changes and/or improvements to the Tamarron
Property without the written consent of Lender, provided that such alterations
do not materially diminish the value of the Tamarron Property.
Upon approval by Lender:
(i) Borrower shall diligently seek all
governmental approvals and any other necessary private
approvals (e.g., ground lessor, mortgagee, etc.) relating to
the construction of any Borrower Improvement; and
(ii) once Borrower begins the construction
of any Borrower Improvement, Borrower shall diligently
prosecute any such Borrower Improvement to completion in
accordance with applicable insurance requirements and the
laws, rules and regulations of all governmental bodies or
agencies having jurisdiction over the Property; and
(iii) Borrower shall not suffer or permit
any mechanics' liens exceeding Two Hundred Fifty Thousand
Dollars ($250,000) in the aggregate at any one time to exist
against the Property (and with respect to such liens will
cause them to be removed of record or bonded over not less
than thirty (30) days prior to any scheduled foreclosure
pursuant to such lien) or suffer or permit any other claims or
demands arising from the work of construction of any Borrower
Improvement to be enforced against the Property or any part
thereof, and Borrower agrees to hold Lender and the Property
free and harmless from all liability from any such liens,
43
claims or demands, together with all costs and expenses in
connection therewith; and
(iv) all work shall be performed in a good
and workmanlike manner.
(b) Scope of Right. Subject to Section 6.7(a), at Borrower's
cost and expense, Borrower shall have the right to:
(i) seek any governmental approvals,
including building permits, licenses, conditional use permits
and any certificates of need that Borrower requires to
construct any Borrower Improvement;
(ii) erect upon the Property such Borrower
Improvements as Borrower deems desirable; and
(iii) engage in any other lawful activities
that Borrower determines are necessary or desirable for the
development of the Property in accordance with its Primary
Intended Use.
Lender shall have the right at any time and from time to time
to post and maintain upon the Property such notices as may be necessary to
protect Lender's interest from mechanics' liens, materialmen's liens or liens of
a similar nature.
6.8 Lender's Right to Audit Calculation of Gross Revenue.
Lender, at its own expense except as provided hereinbelow, shall have the right
from time to time directly or though its accountants to audit the information
set forth in the Officer's Certificate referred to in Section 2.3(d) for a
period of five (5) years from receipt of such Officer's Certificate and in
connection with such audits to examine Borrower's book and records with respect
thereto (including supporting data, sales tax returns and Borrower's work
papers). If any such audit discloses a deficiency in the payment of
Participating Interest, Borrower shall forthwith pay to Lender the amount of the
deficiency as finally agreed or determined, together with interest on such
amount at the Overdue Rate from the date when said payment should have been made
to the date of payment thereof; provided, however, that as to any audit that is
commenced more than twelve (12) months after the date Gross Revenue for any
Fiscal Year is reported by Borrower to Lender in the Officer's Certificate, the
deficiency, if any, with respect to such Gross Revenue shall bear interest as
permitted herein only from the date such determination of deficiency is made
unless such deficiency is the result of gross negligence or willful misconduct
on the part of Borrower. If any such audit discloses that the Gross Revenue
actually received by Borrower for any Fiscal Year exceeds the Gross Revenue
reported by Borrower in the Officer's Certificate by more than two percent (2%),
then Borrower shall pay all reasonable costs of such audit
44
and examination; provided Borrower shall have the right to submit the audit
determination to arbitration in accordance with the procedures set forth in
Article XIII. Lender shall also have the right to review and audit from time to
time Borrower's business operations including all books, records and financial
statements of Borrower. Borrower shall promptly provide to Lender copies of all
such books, records, financial statements or any other documentation of
Borrower's business operations reasonably requested by Lender. Lender shall keep
confidential the contents of such books, records, financial statements and other
documentations, provided Lender shall be permitted to disclose the foregoing to
its attorneys, accountants and advisors who agree to maintain the
confidentiality of such information, and shall also be permitted to disclose the
foregoing as may be necessary or appropriate in any public filings of the
Company or GTA, Inc. or in any litigation proceedings.
6.9 Annual Budget. Not later than forty-five (45) days prior
to the commencement of each Fiscal Year, Borrower shall prepare and submit to
Lender an operating budget (the "Operating Budget") and a capital budget (the
"Capital Budget") prepared in accordance with the requirements of this Section
6.9. The Operating Budget and the Capital Budget (together, the "Annual Budget")
shall be prepared in a form approved by Lender for use throughout the Term and
show by quarter and for the year as a whole the following:
(a) Borrower's reasonable estimate of Gross Revenue and Gross
Expenses itemized on schedules on a quarterly basis as approved by Lender and
Borrower, together with assumptions, in narrative form, forming the basis of
such schedules.
(b) An estimate of any amounts Lender will be requested to
fund for Capital Expenditures during the next two Fiscal Years, subject to the
limitations set forth in Article IX.
(c) A cash flow projection.
(d) A narrative description of any anticipated significant
events, including, if requested by Lender, a narrative description of any
category of operating expenses that decrease or increase by five percent (5%) or
more from the prior year's expenses.
(e) Borrower's reasonable estimate for each Fiscal Quarter of
the Participating Interest to be paid for such quarter.
Lender shall have thirty (30) days after the date on which it receives the
Annual Budget to review, approve or disapprove the Annual Budget, which approval
shall not be withheld so long as such Annual Budget is reasonably designed to
enhance the long-term value of the Innisbrook Property. If the parties are not
45
able to reach agreement on the Annual Budget for any Fiscal Year during Lender's
thirty (30) day review period, the parties shall attempt in good faith during
the subsequent thirty (30) day period to resolve any disputes, which attempts
shall include, if requested by either party, at least one (1) meeting of
executive- level officers of Lender and Borrower and one (1) meeting with the
directors of the Advisory Association. In the event the parties are still not
able to reach agreement on the Annual Budget for any particular Fiscal Year
after complying with the foregoing requirements of this Section 6.9, the parties
shall adopt such portions of the Operating Budget and the Capital Budget as they
may have agreed upon, and any matters not agreed upon shall be referred to a
dispute resolution committee composed of three (3) members of the Advisory
Association unaffiliated with Borrower and two (2) members of the board of
directors of the Company. Such committee shall be responsible for resolving any
such disagreement and the parties agree that the determination of such dispute
resolution committee shall be binding on the parties. In resolving such dispute
the committee shall base its determination on whether the Annual Budget is
reasonably designed to enhance the long-term value of the Innisbrook Property.
Pending the results of such resolution or the earlier agreement of the parties,
(i) if the Operating Budget has not been agreed upon, the Property will be
operated in a manner consistent with the prior year's Operating Budget until a
new Operating Budget is adopted, and (ii) if the Capital Budget has not been
agreed upon, no Capital Expenditures shall be made unless the same are set forth
in a previously approved Capital Budget or are specifically required by Lender
or are otherwise required to comply with Legal Requirements or Insurance
Requirements. Borrower shall operate the Property in a manner reasonably
consistent with the Annual Budget. For purposes of 1997, the Annual Budget and
the Operating Budget shall be the Budget attached hereto as Exhibit E, provided
such Budget shall be updated by Borrower and approved by Lender not later than
forty-five (45) days following the Closing Date.
(f) During the period in which the Innisbrook Property is
being managed by Westin Hotel Company pursuant to the Westin Management
Agreement, the Annual Budget and the Operating Budget shall be determined in
accordance with the provisions of Section 2.3 and 2.4 of the Westin Management
Agreement; provided Lender and Westin Hotel Company shall enter into a separate
agreement respecting their respective rights.
6.10 Financial Statements.
(a) Borrower shall utilize, or cause to be utilized, an
accounting system for the Property in accordance with its usual and customary
practice, and in accordance with GAAP, that will accurately record all data
necessary to compute Participating Interest, and Borrower shall retain for at
least five (5) years after the expiration of each Fiscal Year,
46
reasonably adequate records conforming to such accounting system showing all
data necessary to compute Participating Interest. The books of account and all
other records relating to or reflecting the operation of the Property shall be
kept at either the Property, Borrower's offices or Westin's offices at 2001
Sixth Avenue, Seattle, Washington 98121. Such books and records shall be
available to Lender and its representatives for examination, audit, inspection
and transcription.
(b) Borrower shall furnish to Lender within thirty (30) days
of the end of each Fiscal Quarter (i) unaudited financial statements for the
Fiscal Quarter and year to date, together with the same information for the
comparable prior Fiscal Quarter and year to date, including the following:
results of operations, a balance sheet, statements of cash flows and statement
of changes in owner's equity. If Lender requests, Borrower shall provide
reviewed financial statements for such Fiscal Quarter at Borrower's expense.
Each quarterly report shall also include a narrative explaining any deviation in
any major revenue or expense category or operating expenses (by category) of
more than ten percent (10%) from the amounts set forth on the Annual Budget,
together with, if appropriate a revised Annual Budget, which budget shall be
subject to Lender's review and approval as provided in Section 6.9. Each
quarterly report shall also forecast any projected Participating Interest
payable for the following Fiscal Quarter.
(c) For each Fiscal Year, Borrower shall deliver to Lender
within seventy-five (75) days of the end of such Fiscal Year financial
statements prepared in accordance with GAAP and audited by any nationally
recognized independent accounting firm licensed to practice in front of the
Securities and Exchange Commission.
(d) If requested by Lender, Borrower will make available to
Lender and the Company and their respective lenders, underwriters, counsel,
accountants and advisors such additional information and financial statements
with respect to Borrower and the Property as Lender may reasonably request
without any additional cost to Borrower, and Borrower agrees to reasonably
cooperate with Lender and the Company in effecting public or private debt or
equity financings by the Lender or the Company, without any additional cost to
Borrower, modifications to this Agreement or the requirement of additional
collateral from Borrower.
6.11 Liens, Encroachments and Other Title Matters.
(a) Liens. Subject to the provisions of Section 6.12 relating
to permitted contests, Borrower will not directly or indirectly create or allow
to remain, and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Property or any
attachment, levy, claim or encumbrance emanating from Borrower's actions or
negligence, not including, however:
47
(i) this Agreement and other liens permitted
by the Loan Documents;
(ii) the matters, if any, that existed as of
the Closing Date, as set forth on the title policy received
(and approved in its sole discretion) by Lender;
(iii) restrictions, liens and other
encumbrances which are consented to in writing by Lender, or
any easements granted pursuant to the provisions of Section
6.4(d) of this Agreement;
(iv) liens for those taxes of Lender which
Borrower is not required to pay hereunder;
(v) leases or licenses permitted by Article
XII;
(vi) liens for Impositions or for sums
resulting from noncompliance with Legal Requirements so long
as such liens are in the process of being contested as
permitted by Section 6.12;
(vii) liens of mechanics, laborers,
materialmen, suppliers or vendors for sums either disputed
(provided that such liens are in the process of being
contested as permitted by Section 6.12) or not yet due; and
(viii) the mortgage lien on the Tamarron
Property to secure the obligations of Golf Hosts, Inc. under
the Escrow Agreement and the obligations of Borrower with
respect to additional improvements which may be made in the
future.
(b) Encroachments and Other Title Matters. Excepting any
matters granted or created by Lender after the Closing Date, if any of the
Improvements shall, at any time, encroach upon any property, street or
right-of-way adjacent to the Property, or shall violate the agreements or
conditions contained in any lawful restrictive covenant or other agreement
affecting the Property, or any part thereof, or shall impair the rights of
others under any easement or right-of-way to which the Property is subject, or
the use of the Property is impaired, limited or interfered with by reason of the
exercise of the right of surface entry or any other rights under a lease or
reservation of any oil, gas, water or other minerals, then promptly upon request
of Lender or at the behest of any person affected by any such encroachment,
violation or impairment, Borrower, at its sole cost and expense (subject to its
right to contest the existence of any such encroachment, violation or
impairment), shall protect, indemnify, save harmless and defend Lender, the
Company and any other Lender Indemnitee from and against all losses,
liabilities, obligations, claims, damages, penalties, causes of
48
action, costs and expenses (including reasonable attorneys' fees and expenses)
based on or arising by reason of any such encroachment, violation or impairment
and in such case, in the event of an adverse final determination, either (i)
obtain valid and effective waivers or settlements of all claims, liabilities and
damages resulting from each such encroachment, violation or impairment, whether
the same shall affect Lender or Borrower; or (ii) make such changes in the
Improvements, and take such other actions, as Borrower in the good faith
exercise of its judgment deems reasonably practicable, to remove such
encroachment, and to end such violation or impairment, including, if necessary,
the alteration of any of the Improvements, and in any event take all such
actions as may be necessary in order to be able to continue the operation of the
Improvements for the Primary Intended Use substantially in the manner and to the
extent the Improvements were operated prior to the assertion of such violation
or encroachment. Borrower's obligation under this Section 6.11 shall be in
addition to and shall in no way discharge or diminish any obligation of any
insurer under any policy of title or other insurance and Borrower shall be
entitled to a credit for any sums recovered by Lender under any such policy of
title or other insurance.
(c) Survey. Borrower shall, promptly following the Closing
Date, undertake to provide Lender with an ALTA/ACSM survey of the Innisbrook
Premises with such certifications as Lender shall reasonably require.
6.12 Permitted Contests.
(a) Authorization. Borrower may contest, by appropriate legal
proceedings conducted in good faith and with due diligence, the amount, validity
or application, in whole or in part, of any Imposition or any Legal Requirement
or Insurance Requirement, or any lien, attachment, levy, encumbrance, charge or
claim not otherwise permitted by Section 6.11(a); provided, however, that
nothing in this Section 6.12 shall limit the right of Lender to contest the
amount, validity or application, in whole or in part, of any Imposition, Legal
Requirement, Insurance Requirement, or any lien, attachment, levy, encumbrance,
charge or claim with respect to the Property (and Borrower shall reasonably
cooperate with Lender with respect to such contest), and, further provided that:
(i) in the case of an unpaid Imposition,
lien, attachment, levy, encumbrance, charge or claim, the
commencement and continuation of such proceedings shall
suspend the collection thereof from Lender and from the
Property, and neither the Property nor any income therefrom
nor any part thereof or interest therein would be in any
danger of being sold, forfeited, attached or lost pending the
outcome of such proceedings;
(ii) in the case of a Legal Requirement,
Lender would not be subject to criminal or material
49
civil liability for failure to comply therewith pending the
outcome of such proceedings. Nothing in this Section
6.12(a)(ii), however, shall permit Borrower to delay
compliance with any requirement of an Environmental Law to the
extent such non-compliance poses an immediate threat of injury
to any Person or to the public health or safety or of material
damage to any real or personal property;
(iii) in the case of a Legal Requirement
and/or an Imposition, lien, encumbrance or charge, Borrower
shall give such reasonable security, if any, as may be
demanded by Lender to insure ultimate payment of the same and
to prevent any sale or forfeiture of the affected Property or
the Interest by reason of such non-payment or noncompliance,
provided, however, the provisions of this Section 6.12 shall
not be construed to permit Borrower to contest the payment of
Interest or any other sums payable by Borrower to Lender
hereunder;
(iv) no such contest shall interfere in any
material respect with the use or occupancy of the Property;
(v) in the case of an Insurance Requirement,
the coverage required by Article VII shall be maintained; and
(vi) if such contest be finally resolved
against Lender or Borrower, Borrower shall, as Additional
Charges due hereunder, promptly pay the amount required to be
paid, together with all interest and penalties accrued
thereon, or comply with the applicable Legal Requirement or
Insurance Requirement.
(b) Indemnification of Lender. If Lender so desires, Lender
shall be permitted to join as a party in any contest permitted pursuant to this
Section 6.12. Borrower shall indemnify and save Lender harmless against any
liability, cost or expense of any kind that may be imposed upon Lender in
connection with any such contest and any loss resulting therefrom.
6.13 Legal Requirements. Subject to Section 6.12 regarding
permitted contests, Borrower, at its expense, shall promptly (a) comply with all
Legal Requirements and Insurance Requirements in respect of the use, operation,
maintenance, repair and restoration of the Property, whether or not compliance
therewith shall require structural changes in any of the Improvements or
interfere with the use and enjoyment of the Property; and (b) procure, maintain
and comply with all material licenses and other authorizations required for any
use of the Property then being made, and for the proper erection, installation,
operation and maintenance of the Property or any party thereof.
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6.14 Actions Affecting Property. Borrower shall give Lender
prompt written notice of the assertion of any claim with respect to, or the
filing of any action or proceeding purporting to affect the Property, any of the
Loan Documents or the rights or powers of Lender. Borrower shall appear in and
contest any such action or proceeding and shall pay all costs and expenses,
including cost of evidence of title and attorneys' fees, in any such action or
proceeding in which Lender may appear.
6.15 Material Agreements. Borrower agrees not to terminate or
materially modify the Master Lease or the Westin Management Agreement or any
interest therein without the prior written consent of Lender, which consent
shall not be unreasonably withheld or delayed. Any subsequent manager of the
Innisbrook Property shall be a first-class upscale hotel operator with relevant
experience in the operation and management of first-class golf facilities.
Consent to one amendment, change, agreement or modification shall not be deemed
to be a waiver of the right to require consent to other, future or successive
amendments, changes, agreements or modifications. Borrower shall perform all
obligations and agreements under the Master Lease and the Westin Management
Agreement and shall not take any action or omit to take any action which would
effect or permit the termination of any of said agreements. Borrower shall
promptly notify Lender in writing with respect to any default or alleged default
by any party thereto and to deliver to Lender copies of all notices, demands,
complaints or other communications received or given by Borrower with respect to
any such default or alleged default. Lender shall have the option, but no
obligation, to cure any such default and to perform any or all of Borrower's
obligations thereunder. All sums expended by Lender in curing any such default
shall be secured by the Loan Documents and shall be immediately due and payable
without demand or notice and shall bear interest from date of expenditure at the
Overdue Rate.
6.16 Lender Inspections. At any time that any material Capital
Expenditure individually in excess of $100,000 is being incurred during the
Term, during normal business hours, Borrower shall permit Lender and Lender's
representatives, inspectors and consultants to enter upon the Real Property, to
inspect any construction and materials to be used therein and to examine all
contracts, records, plans and shop drawings which are kept at the construction
site or at Borrower's offices. Lender shall keep confidential the information
obtained from such inspections, provided Lender shall be permitted to disclose
such information to its attorneys, accountants and advisors who agree to
maintain the confidentiality of such information, and shall also be permitted to
disclose such information as may be necessary or appropriate in any public
filing of the Company or GTA, Inc. or in any litigation proceedings.
6.17 Trade Names. Borrower shall immediately notify Lender in
writing of any change in the place of business of, or
51
the change in the legal, trade or fictitious business names used by, Borrower,
any of its constituent general partners or Guarantor and shall, upon Lender's
request, execute any additional financing statements and other certificates
necessary to reflect any change in trade names or fictitious business names.
6.18 Officer's Certificates. At any time, and from time to
time upon Borrower's receipt of not less than ten (10) days' prior written
request by Lender, Borrower will furnish to Lender an Officer's Certificate
certifying that:
(a) this Agreement is unmodified and in full force and effect
(or that this Agreement is in full force and effect as modified and setting
forth the modifications);
(b) the dates to which the Interest has been paid;
(c) whether or not to the best knowledge of Borrower, Lender
is in default in the performance of any covenant, agreement or condition
contained in this Agreement and, if so, specifying each such default of which
Borrower may have knowledge;
(d) that, except as otherwise specified, there are no
proceedings pending or, to the knowledge of the signatory, threatened, against
Borrower before or by any court or administrative agency which, if adversely
decided, would materially and adversely affect the financial condition and
operations of Borrower; and
(e) responding to such other questions or statements of fact
as Lender shall reasonably request.
Borrower's failure to deliver such Officer's Certificate
within such time shall constitute an acknowledgement by Borrower that this
Agreement is unmodified and in full force and effect except as may be
represented to the contrary by Lender, Lender is not in default in the
performance of any covenant, agreement or condition contained in this Agreement
and the other matters set forth in such request, if any, are true and correct.
Any such Officer's Certificate furnished pursuant to this Section 6.18 may be
relied upon by Lender and any prospective lender or purchaser.
6.19 Protective Advances. If Borrower shall at any time fail
to perform or comply with any of the terms, covenants and conditions required on
Borrower's part to be performed and complied with under this Agreement, any of
the other Loan Documents or any other agreement that, under the terms of this
Agreement, Borrower is required to perform, then Lender, without waiving or
releasing Borrower from any of its obligations hereunder, may, in its sole
discretion upon ten (10) days prior
52
written notice to Borrower (except in an emergency in which case no notice shall
be required):
(a) make any payments hereunder or thereunder payable by
Borrower and take out, pay for and maintain any of the insurance policies
provided for herein; and/or
(b) after the expiration of any applicable grace period and
subject to Borrower's rights to contest certain obligations specifically granted
hereby, perform any such other acts hereunder or thereunder on the part of
Borrower to be performed and enter upon the Property for such purpose; and/or
(c) perform any act in such manner and to such extent as
Lender may deem necessary to protect the security hereof, Lender being
authorized to enter upon the Property for such purpose; appear in and defend any
action or proceeding purporting to affect, in any manner whatsoever, the
obligations of Borrower hereunder, the security therefor or the rights or powers
of Lender; pay, purchase or compromise any encumbrance, charge or lien that in
the judgment of Lender is prior or superior to any mortgage granted Lender.
All sums so paid out of Lender's own funds and all reasonable out-of-pocket
costs and expenses incurred and paid by Lender in connection with the
performance of any such act, including, without limitation, attorneys' fees and
any allocated costs of in-house counsel (provided such services are not
redundant with the services of any outside counsel), together with interest on
unpaid balances thereof at the Overdue Rate from the respective dates of
Lender's making of each such payment, shall be added to the principal of the
Note, shall be secured by the Loan Documents and by the lien of any mortgage
granted Lender, prior to any right, title or interest in or claim upon the
Property attaching or accruing subsequent to the lien of any mortgage or
security interest granted Lender and shall be payable by Borrower to Lender on
demand.
6.20 Reporting of Original Issue Discount. Borrower agrees
that it will report for purposes of calculating original issue discount interest
accruing at an annual rate of 11.5% for the term of the Loan.
ARTICLE VII
INSURANCE
7.1 General Insurance Requirements. During the Term, Borrower
shall at all times keep the Property, and all property located in or on the
Property, including any Borrower Improvements, insured with the kinds and
amounts of insurance described below. Lender and Borrower acknowledge that the
Condominiums are not owned by Borrower and, except as may be set forth in the
Master Lease, Borrower shall have no obligation pursuant to this Agreement or
the other Loan Documents to insure
53
and/or rebuild the Condominiums following any damage or destruction. This
insurance shall be written by companies authorized to do insurance business in
the State, and shall otherwise meet the requirements set forth in Section 7.5 of
this Agreement. The policies must name Lender as an additional insured or loss
payee, as applicable, by way of a standard form of mortgagee's loss payable
endorsement. Losses shall be payable to Lender and/or Borrower as provided in
this Article VII. In addition, the policies shall name as a loss payee any
Lender Assignee by way of a standard form of mortgagee's loss payable
endorsement. Any loss adjustment in excess of $250,000 shall require the written
consent of Lender, Borrower, and each Lender Assignee, if any. Evidence of
insurance shall be deposited with Lender and, if requested, with any Lender
Assignee(s). The policies on the Property, including the Improvements, Fixtures,
Tangible and Intangible Personal Property and any Borrower Improvements, shall
insure against the following risks:
(a) All Risk. Loss or damage by all risks or perils including,
but not limited to, fire, vandalism, malicious mischief and extended coverages,
including sprinkler leakage, in an amount not less than 100% of the then Full
Replacement Cost thereof covering all structures built on the Property and all
Tangible Personal Property; and further provided the Tangible Personal Property
may be insured at its fair market value.
(b) Liability. Claims for personal injury or property damage
under a policy of comprehensive general public liability insurance with amounts
not less than five million dollars ($5,000,000) per occurrence and in the
aggregate.
(c) Flood. Flood insurance (when the Property is located in
whole or in material part a designated flood plain area) in an amount similar to
the amount insured by comparable golf course properties in the area.
Notwithstanding the foregoing, Borrower shall not be required to participate in
the National Flood Insurance Program or otherwise obtain flood insurance to the
extent not available at commercially reasonable rates; provided Borrower shall
give Lender written notice thereof prior to cancelling or not obtaining any
flood insurance. Borrower may opt to insure the structures only, and not the
Land, subject to the approval of Lender, in Lender's reasonable discretion.
(d) Worker's Compensation. Adequate worker's compensation
insurance coverage for all Persons employed by Borrower on the Property in
accordance with the requirements of applicable federal, state and local laws.
Borrower shall have the option to self-insure up to five thousand dollars
($5,000) of the amount of insurance required in the event State law permits such
self-insurance, subject to the approval of Lender, in Lender's sole and absolute
discretion.
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7.2 Other Insurance. Such other insurance on or in connection
with any of the Property as Lender or any Lender Assignee may reasonably
require, which at the time is usual and commonly obtained in connection with
properties similar in type of building size and use to the Property and located
in the geographic area where the Property is located.
7.3 Replacement Cost. In the event either party believes that
the Full Replacement Cost of the insured property has increased or decreased at
any time during the Term, it shall have the right to have such Full Replacement
Cost redetermined by the Impartial Appraiser. The party desiring to have the
Full Replacement Cost so redetermined shall forthwith, on receipt of such
determination by such Impartial Appraiser, give written notice thereof to the
other party hereto. The determination of such Impartial Appraiser shall be final
and binding on the parties hereto, and Borrower shall forthwith increase, or may
decrease, the amount of the insurance carried pursuant to this Section 7.3, as
the case may be, to the amount so determined by the Impartial Appraiser. Each
party shall pay one-half of the fee, if any, of the Impartial Appraiser.
7.4 Waiver of Subrogation. All insurance policies carried by
either party covering the Property including contents, fire and casualty
insurance, shall expressly waive any right of subrogation on the part of the
insurer against the other party (including any Lender Assignee). The parties
hereto agree that their policies will include such waiver clause or endorsement
so long as the same are obtainable without extra cost, and in the event of such
an extra charge the other party, at its election, may pay the same, but shall
not be obligated to do so.
7.5 Form Satisfactory, Etc. All of the policies of insurance
referred to in this Article VII shall be written in a form reasonably
satisfactory to Lender and by insurance companies rated not less than B+, XI by
A.M. Best's Insurance Guide. Borrower shall pay all premiums for the policies of
insurance referred to in Sections 7.1 and 7.2 and shall deliver certificates
thereof to Lender prior to their effective date (and with respect to any renewal
policy, at least ten (10) days prior to the expiration of the existing policy).
In the event Borrower fails to satisfy its obligations under this Article VII,
Lender shall be entitled, but shall have no obligation, to effect such insurance
and pay the premiums therefor, which premiums shall be repayable to Lender upon
written demand as Additional Charges. Each insurer issuing policies pursuant to
this Article VII shall agree, by endorsement on the policy or policies issued by
it, or by independent instrument furnished to Lender, that it will give to
Lender thirty (30) days' written notice before the policy or policies in
question shall be altered, allowed to expire or cancelled. Each such policy
shall also provide that any loss otherwise payable thereunder shall be payable
notwithstanding (i) any act or omission of Lender or Borrower which might,
absent such provision, result in a forfeiture of all or a part of such
55
insurance payment, (ii) the occupation or use of the Property for purposes more
hazardous than those permitted by the provisions of such policy, (iii) any
foreclosure or other action or proceeding taken by any Lender Assignee pursuant
to any provision of a mortgage, note, assignment or other document evidencing or
securing a loan upon the happening of an event of default therein or (iv) any
change in title to or ownership of the Property.
7.6 Change in Limits. In the event that Lender shall at any
time reasonably determine on the basis of prudent industry practice that the
liability insurance carried by Borrower pursuant to Sections 7.1 and 7.2 is
either excessive or insufficient, the parties shall endeavor to agree on the
proper and reasonable limits for such insurance to be carried; and such
insurance shall thereafter be carried with the limits thus agreed on until
further changed pursuant to the provisions of this Article VII; provided,
however, that the deductibles for such insurance or the amount of such insurance
which is self-retained by Borrower shall be as reasonably determined by Borrower
so long as Borrower can reasonably demonstrate its ability to satisfy such
deductible or amount of such self-retained insurance.
7.7 Blanket Policy. Notwithstanding anything to the contrary
contained in this Article VII, Borrower's obligations to carry the insurance
provided for herein may be brought within the coverage of a so-called blanket
policy or policies of insurance carried and maintained by Borrower; provided,
however, that the coverage afforded Lender will not be reduced or diminished or
otherwise be different from that which would exist under a separate policy
meeting all other requirements of this Agreement by reason of the use of such
blanket policy of insurance, and provided further that the requirements of this
Article VII are otherwise satisfied. The amount of this total insurance
allocated to each of the Innisbrook Facility and the Tamarron Facility, which
amount shall be not less than the amounts required pursuant to Sections 7.1 and
7.2, shall be specified either (i) in each such "blanket" or umbrella policy or
(ii) in a written statement, which Borrower shall deliver to Lender and Lender
Assignee, from the insurer thereunder. A certificate of each such "blanket" or
umbrella policy shall promptly be delivered to Lender and Lender Assignee.
7.8 Insurance Proceeds. All proceeds of insurance payable by
reason of any loss or damage to the Property, or any portion thereof, and
insured under any policy of insurance required by this Article VII shall (i) if
greater than $250,000, be paid to Lender and held by Lender and (ii) if less
than such amount, be paid to Borrower and held by Borrower. All such proceeds
shall be held in trust and deposited in an interest bearing account and shall be
made available, together with any interest, for reconstruction or repair, as the
case may be, of any damage to or destruction of the Property, or any portion
thereof.
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7.9 Disbursement of Proceeds. Any proceeds held by Lender or
Borrower shall be paid out by Lender or Borrower from time to time for the
reasonable costs of such reconstruction or repair; provided, however, that
Lender shall disburse proceeds subject to the following requirements:
(a) prior to commencement of restoration, (i) the architects,
contracts, contractors, plans and specifications for the restoration shall have
been approved by Lender, which approval shall not be unreasonably withheld or
delayed and (ii) appropriate waivers of mechanics' and materialmen's liens shall
have been filed;
(b) Borrower shall have obtained and delivered to Lender
copies of all necessary governmental and private approvals necessary to complete
the reconstruction or repair, including building permits, licenses, conditional
use permits and certificates of need;
(c) at the time of any disbursement, subject to Section 6.12,
no mechanics' or materialmen's liens shall have been filed against any of the
Property and remain undischarged, unless a satisfactory bond shall have been
posted in accordance with the laws of the State;
(d) disbursements shall be made from time to time in an amount
not exceeding the cost of the work completed since the last disbursement, upon
receipt of (i) satisfactory evidence of the stage of completion, the estimated
total cost of completion and performance of the work to date in a good and
workmanlike manner in accordance with the contracts, plans and specifications,
(ii) waivers of liens, (iii) a satisfactory bring down of title insurance and
(iv) other evidence of cost and payment so that Lender and Lender Assignee can
verify that the amounts disbursed from time to time are represented by work that
is completed, in place and free and clear of mechanics' and materialmen's lien
claims;
(e) each request for disbursement shall be accompanied by a
certificate of Borrower, signed by a senior member or officer of Borrower,
describing the work for which payment is requested, stating the cost incurred in
connection therewith, stating that Borrower has not previously received payment
for such work and, upon completion of the work, also stating that the work has
been fully completed and complies with the applicable requirements of this
Agreement; and
(f) to the extent actually held by Lender and not a Lender
Assignee, (1) the proceeds shall be held in a separate account and shall not be
commingled with Lender's other funds, and (2) interest shall accrue on funds so
held at the money market rate of interest and such interest shall constitute
part of the proceeds.
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7.10 Excess Proceeds, Deficiency of Proceeds. Any excess
proceeds of insurance remaining after the completion of the restoration or
reconstruction of the Property (or in the event neither Lender nor Borrower is
required to or elects to repair and restore) shall be paid to Borrower. All
salvage resulting from any risk covered by insurance shall belong to Borrower.
If the costs of restoration or reconstruction exceeds the
amount of proceeds received by Lender or Borrower from insurance, Borrower shall
pay for such excess cost of restoration or reconstruction, except that Borrower
shall be entitled to withdraw from the Capital Replacement Fund an amount
necessary to cover some or all of such excess subject; provided any amount so
withdrawn must be restored by Borrower to the Capital Replacement Fund within
two (2) years of such withdrawal.
7.11 Reconstruction Covered by Insurance.
(a) Destruction Rendering Property Unsuitable for its Primary
Use. If during the term the Property is totally or partially destroyed from a
risk covered by the insurance described in Article VII and the Property thereby
is rendered Unsuitable For Its Primary Intended Use, Borrower shall, at its
election, either (i) diligently restore the Property to substantially the same
condition as existed immediately before the damage or destruction, or (ii)
prepay the Loans.
(b) Destruction Not Rendering Property Unsuitable for its
Primary Use. If during the term, the Property is totally or partially destroyed
from a risk covered by the insurance described in Article VII, but the Property
is not thereby rendered Unsuitable For Its Primary Intended Use, Borrower shall
diligently restore the Property to substantially the same condition as existed
immediately before the damage or destruction; provided, however, Borrower shall
not be required to restore certain Tangible Personal Property and/or any
Borrower Improvements if failure to do so does not adversely affect the amount
of Interest payable hereunder or the Primary Intended Use in substantially the
same manner immediately prior to such damage or destruction. Such damage or
destruction shall not terminate this Agreement; provided further, however, if
Borrower cannot within eighteen (18) months obtain all necessary governmental
approvals, including building permits, licenses, conditional use permits and any
certificates of need, after diligent efforts to do so in order to be able to
perform all required repair and restoration work and to operate the Property for
its Primary Intended Use in substantially the same manner immediately prior to
such damage or destruction, Borrower may prepay the Loans.
7.12 Reconstruction Not Covered by Insurance. If during the
Term, the Property is totally or materially destroyed from a risk not covered by
the insurance described in Article VII, whether or not such damage or
destruction renders the
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Property Unsuitable For Its Primary Intended Use, Borrower shall restore the
Property to substantially the same condition as existed immediately before the
damage or destruction. Borrower shall have the right to use proceeds from the
Capital Replacement Fund to perform such work, subject to the conditions set
forth in Article IX hereof.
7.13 No Abatement of Obligations. This Agreement shall remain
in full force and effect and Borrower's obligation to make interest payments and
to pay all other charges required by this Agreement shall remain unabated during
the period required for repair and restoration.
7.14 Damage Near End of Term. Notwithstanding any other
provision to the contrary in this Article VII, if damage to or destruction of
the Property occurs during the last twenty-four (24) months of the Term, and if
such damage or destruction cannot reasonably be expected by Lender to be fully
repaired or restored prior to the date that is twelve (12) months prior to the
end of the Term, then either Lender or Borrower shall have the right to
accelerate the Maturity Date on thirty (30) days' prior notice to the other by
giving notice thereof within sixty (60) days after the date of such damage or
destruction. Upon any such termination, Lender shall be entitled to retain all
insurance proceeds, grossed up by Borrower to account for the deductible or any
self-insured retention. If Lender shall give Borrower a notice under this
Section 7.14 that it seeks to terminate this Agreement at a time prior to the
end of the Term, then such termination notice shall be of no effect if Borrower
shall so notify Lender within thirty (30) days.
ARTICLE VIII
CONDEMNATION
8.1 Total Taking. If at any time during the Term the
Innisbrook Premises are totally and permanently taken by Condemnation, this
Agreement shall terminate on the Date of Taking and Borrower shall promptly pay
all outstanding Interest, principal and other charges through the date of
termination. Lender shall be entitled to immediately exercise its purchase
option pursuant to Article XI, with the exercise of such option deemed to have
taken place immediately prior to the effectiveness of any such condemnation
action. If at any time during the Term and prior to the Release Date the
Tamarron Premises are totally and permanently taken by Condemnation, this
Agreement shall continue in full force and effect, and Lender shall be entitled
to the first $250,000 of proceeds therefrom together with any additional amounts
payable to Borrower after repayment of the Permitted Exceptions with respect to
the Tamarron Premises, which amount Lender shall hold as Additional Collateral
in accordance with the terms hereof. Amounts so held as Additional Collateral
pursuant to this Section 8.1 from time to time shall be deemed to accrue
interest at a money market rate as reasonably determined
59
by Lender and such interest shall be credited to such cash collateral account.
8.2 Partial Taking. If a portion of the Property is taken by
Condemnation, this Agreement shall remain in effect if the Innisbrook Property
is not thereby rendered Unsuitable For Its Primary Intended Use, but if the
Innisbrook Property is thereby rendered Unsuitable For Its Primary Intended Use,
this Agreement shall terminate on the Date of Taking.
8.3 Restoration. If there is a partial taking of the Property
and this Agreement remains in full force and effect pursuant to Section 8.2,
Borrower at its cost shall accomplish all necessary restoration up to but not
exceeding the amount of the Award payable to Borrower, as provided herein. If
the partial taking affects the Tamarron Property, and restoration is not
feasible, the proceeds of the applicable Award shall be treated as cash
collateral in accordance with the terms set forth in Section 8.1.
8.4 Award-Distribution. The entire Award shall belong to and
be paid to Lender, except that, subject to the rights of the Lender Assignee,
Borrower shall be entitled, in the event that Borrower restores the Property, to
receive from the Award disbursements in the same manner as the disbursement of
insurance proceeds pursuant to Section 7.9. Borrower shall also be entitled to
disbursement from any Award, if and to the extent such Award specifically
includes such item, a sum attributable to the value of the loss of Borrower's
business during the remaining term, less the amount of any such value in which
Lender would have participated pursuant to the terms of this Agreement.
8.5 Temporary Taking. The taking of the Property, or any part
thereof, by military or other public authority shall constitute a taking by
Condemnation only when the use and occupancy by the taking authority has
continued for longer than six (6) months. During any such six (6) month period,
which shall be a temporary taking, all the provisions of this Agreement shall
remain in full force and effect. In the event of any such temporary taking, the
entire amount of any such Award made for such temporary taking allocable to the
Term, whether paid by way of damages, rent or otherwise, shall be paid to
Borrower.
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ARTICLE IX
CAPITAL REPLACEMENT FUND
9.1 Capital Replacement Fund. Borrower shall be obligated to
pay to Lender, and Lender shall be obligated to accrue, the Capital Replacement
Reserve. Amounts in the Capital Replacement Fund shall be and remain the
property of Borrower, shall be subject to the rights of Lender as herein
provided, and shall be additional security for Borrower's obligations hereunder.
The Capital Replacement Reserve shall be paid to Lender by Borrower on the last
day of each Fiscal Quarter of Borrower. Amounts in the Capital Replacement Fund
from time to time shall be deemed to accrue interest at a money market rate as
reasonably determined by Lender and such interest shall be credited to the
Capital Replacement Fund. Upon the written request by Borrower to Lender stating
the specific use to be made and subject to the reasonable approval of Lender,
the Capital Replacement Fund shall be made available to Borrower for Capital
Expenditures. Borrower shall have no rights with respect to any amounts in the
Capital Replacement Fund except as provided herein. Subject to Lender's approval
of the Capital Expenditures (which approval shall not be unreasonably withheld
and which shall be granted provided such improvements are reasonably expected to
increase the long-term value of the Property), Lender shall make available to
Borrower amounts from the Capital Replacement Fund under the following
conditions:
(a) No Event of Default exists and is continuing;
(b) Borrower presents paid qualifying receipts or invoices;
(c) Such expenditures are included in the Capital Budget
submitted to and approved by Lender in accordance with Section 6.9 or will
enhance the long-term value of the Property; and
(d) If from time to time Borrower shall expend monies beyond
the balance in the Capital Replacement Fund, then Borrower shall be afforded the
opportunity to present such paid invoices for reimbursement at later dates when
the Borrower's reserve balance shall be replenished to a level that can support
such expenditure.
9.2 Capital Replacement Fund to Be Held Pursuant to the Terms
of the Westin Management Agreement. During the period Westin Hotel Company is
managing the Innisbrook Property pursuant to the Westin Management Agreement,
the Capital Replacement Fund shall be held by Westin Hotel Company pursuant to
the terms of the Westin Management Agreement; provided Lender and Westin Hotel
Company shall enter into a separate agreement respecting their respective
rights.
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ARTICLE X
EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. If any one or more of the following
events (individually, an "Event of Default") shall occur:
(a) if Borrower shall fail to make payment of the Interest
payable by Borrower under this Agreement when the same becomes due and payable
and such failure is not cured by Borrower within a period of ten (10) days after
receipt by Borrower of notice thereof from Lender; provided, however, Borrower
is only entitled to three (3) such notices per twelve (12) month period and that
such notice shall be in lieu of and not in addition to any notice required under
applicable law;
(b) if Borrower shall fail to observe or perform any material
term, covenant or condition of this Agreement and such failure is not cured by
Borrower within a period of thirty (30) days after receipt by Borrower of notice
thereof from Lender, unless such failure cannot with due diligence be cured
within a period of thirty (30) days, in which case such failure shall not be
deemed to continue if Borrower proceeds promptly and with due diligence to cure
the failure and diligently completes the curing thereof as soon as reasonably
practicable following receipt of notice from Lender of the default; provided,
however, that such notice shall be in lieu of and not in addition to any notice
required under applicable law; provided further, however, that the cure period
shall not extend beyond thirty (30) days as otherwise provided by this Section
10.1(b) if the facts or circumstances giving rise to the default are creating a
further harm to Lender or the Property and Lender makes a good faith
determination that Borrower is not undertaking remedial steps that Lender would
cause to be taken if this Agreement were then to terminate;
(c) if Borrower shall:
(i) admit in writing its inability to pay
its debts as they become due,
(ii) file a petition in bankruptcy or a
petition to take advantage of any insolvency act,
(iii) make an assignment for the benefit of
its creditors,
(iv) be unable to pay its debts as they
mature,
(v) consent to the appointment of a receiver
of itself or of the whole or any substantial part of its
property, or
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(vi) file a petition or answer seeking
reorganization or arrangement under the Federal bankruptcy
laws or any other applicable law or statute of the United
States of America or any state thereof;
(d) if Borrower shall, on a petition in bankruptcy filed
against it, be adjudicated as bankrupt or a court of competent jurisdiction
shall enter an order or decree appointing, without the consent of Borrower, a
receiver of Borrower or of the whole or substantially all of its property, or
approving a petition filed against it seeking reorganization or arrangement of
Borrower under the federal bankruptcy laws or any other applicable law or
statute of the United States of America or any state thereof, and such judgment,
order or decree shall not be vacated or set aside or stayed within sixty (60)
days from the date of the entry thereof;
(e) if Borrower shall be liquidated or dissolved, or shall
begin proceedings toward such liquidation or dissolution;
(f) if the estate or interest of Borrower in the Property or
any part thereof shall be levied upon or attached in any proceeding and the same
shall not be vacated or discharged or bonded within the later of ninety (90)
days after commencement thereof or thirty (30) days after receipt by Borrower of
notice thereof from Lender (unless Borrower shall be contesting such lien or
attachment in accordance with Section 6.12); provided, however, that such notice
shall be in lieu of and not in addition to any notice required under applicable
law;
(g) if, except as a result of damage, destruction or a partial
or complete Condemnation Borrower voluntarily ceases operations on the Property;
(h) any representation or warranty made by Borrower herein or
in any certificate, demand or request made pursuant hereto proves to be
incorrect, now or hereafter, in any material respect and the same has not been
cured or remedied within a period of thirty (30) days after receipt by Borrower
of notice thereof from Lender; or
(i) an "Event of Default" (as defined in any lease or loan) by
any Affiliate of Borrower in any other lease or loan by and between such party
and Lender or any Affiliate of Lender, or an "Event of Default" under the Pledge
Agreement;
THEN, Borrower shall be declared to have breached this
Agreement. Lender may accelerate Borrower's obligations hereunder by giving
Borrower not less than ten (10) days' notice (or no notice for clauses (c), (d),
(e), (f) and (g)) of such termination and upon the expiration of the time fixed
in such notice, all amounts due and payable hereunder or under any of the Loan
Documents shall become immediately due and payable and all
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rights of Borrower under this Agreement shall cease. Lender shall have all
rights at law and in equity available to Lender and to secured lenders generally
as a result of Borrower's breach of this Agreement.
10.2 Payment of Costs. Borrower shall, to the extent permitted
by law, pay as Additional Charges all costs and expenses incurred by or on
behalf of Lender, including reasonable attorneys' fees and expenses, as a result
of any Event of Default hereunder.
10.3 Appointment of Receiver. Upon the occurrence of an Event
of Default, and upon filing of a suit or other commencement of judicial
proceedings to enforce the rights of Lender hereunder, Lender shall be entitled,
as a matter or right, to the appointment of a receiver or receivers acceptable
to Lender of the Property and of the revenues, earnings, income, products and
profits thereof, pending such proceedings, with such powers as the court making
such appointment shall confer.
10.4 Waiver. If this Agreement is terminated pursuant to
Section 10.1, Borrower waives, to the extent permitted by applicable law (a) any
right of redemption, re-entry or repossession.
10.5 Prepayment Premium. Upon acceleration of the obligations
of Borrower hereunder, whether before or after an Event of Default, then in
addition to payment of all other amounts due and owing under this Agreement or
the other Loan Documents, Borrower shall pay to Lender, as prepayment
consideration, an amount equal to the greater of (a) ten (10%) percent of the
outstanding Loan balance, or (b) the present value of a series of payments each
equal to the Payment Differential payable on each monthly payment date over the
balance of the term of the Note discounted at the Reinvestment Yield.
Notwithstanding the foregoing, no prepayment premium shall be due and owing upon
the repayment of the Loan as a result of a prepayment in accordance with Article
VII or Article VIII.
10.6 Application of Funds. Any payments received by Lender
under any of the provisions of this Agreement during the existence or
continuance of any Event of Default (and such payment is made to Lender rather
than Borrower due to the existence of an Event of Default) shall be applied to
Borrower's obligations in the order which Lender may determine or as may be
prescribed by the laws of the State.
ARTICLE XI
PURCHASE OPTION
Upon the expiration or sooner termination of this Agreement
for any purpose whatsoever (including in the event of an Event of Default and
the exercise by Lender of its remedies under the Loan Documents), and without
limiting any other rights
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or remedies available to Lender hereunder, Lender shall have the right to
acquire the Innisbrook Property from Borrower (the "Purchase Option") for either
of the following forms of consideration:
(a) The payment by Lender to Borrower, in cash, of the Fair
Market Value of the Innisbrook Property on the date of exercise of the Purchase
Option (subject to Borrower's obligation to pay the outstanding principal amount
of the Loan and accrued interest, together with any other payments due and owing
under this Agreement or the Loan Documents, including the Additional Interest
Amount); or
(b) Cancellation of the outstanding principal balance of the
Loan, including any obligation to pay the Additional Interest Amount, and the
issuance by Lender to Borrower of the Purchase Price/Lender's Shares (as
increased by any stock splits or stock dividends issued by GTA Inc. during the
term of this Agreement and adjusted for any successor entity to GTA by way of
merger or otherwise based on the exchange rate at the time of such merger).
Upon notice of exercise by Lender of the Purchase Option, Borrower shall execute
a special warranty deed, bill of sale, and such other documents and instruments
as Lender reasonably requires, and shall take all other actions reasonably
necessary or desirable to convey good and marketable title to the Innisbrook
Property to Lender, subject only to Permitted Exceptions. Borrower shall not
remove any Tangible Personal Property from the Property upon termination of the
Agreement and any amounts remaining in the Capital Replacement Reserve shall be
paid over to Lender. Borrower shall pay for an owner's title insurance policy
for Lender, in customary form, and shall pay for all transfer and recording
taxes applicable to such purchase and sale. The purchase option granted to
Lender herein shall be memorialized and recorded in the Deed of Trust. Upon
consummation of Lender's option to purchase the Innisbrook Property pursuant to
this Article XI, Borrower shall vacate and surrender the Innisbrook Property to
Lender in the condition in which the Innisbrook Property was in on the Closing
Date, except as repaired, rebuilt, restored, altered or added to as permitted or
required by the provisions of this Agreement and except for ordinary wear and
tear (subject to the obligation of Borrower to maintain the Property in good
order and repair during the Term). Lender shall cooperate with Borrower to
minimize any adverse tax impact to Borrower upon Lender's exercise of the
Purchase Option, including, without limitation, the purchase of the stock of the
entity owning the Innisbrook Property; provided such cooperation shall be at no
additional cost to Lender, shall not result in Lender having a different tax
basis in the Innisbrook Property, shall not subject Lender to additional
liabilities, nor delay the conveyance of the Innisbrook Property to Lender.
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ARTICLE XII
SALE, LEASING AND ASSIGNMENT
12.1 Prohibition Against Sale. Borrower shall not, without the
prior written consent of Lender, which consent Lender may withhold in its
reasonable discretion, sell, assign, or otherwise transfer (except to an
Affiliate of Borrower or a Permitted Assignee) the Property or any interest
therein, whether voluntarily, involuntarily or by operation of law. For purposes
of this Article 12, a Change in Control of the Borrower shall constitute a sale
of the Property. In no event shall Borrower be permitted to place junior
encumbrances on all or any part of the Innisbrook Property, except to the extent
specially permitted by Section 2.11(c).
12.2 Leases.
(a) Permitted Leases. In no event shall Borrower lease all or
any portion of the Property in a manner which is inconsistent with Borrower's
obligation to enhance the long-term value of the Property, nor shall Lender
withhold its consent to any assignment or sublease of the Property which is
consistent with such obligation. Lender hereby approves all existing leases and
licenses on the Property which are set forth in Schedule 6.9 of the Stock
Purchase and Merger Agreement. Borrower's proposed lease or any of the following
transfers shall require Lender's prior written consent, which consent Lender may
withhold in its reasonable discretion provided Lender determines that such lease
or transfer is inconsistent with Borrower's obligation to enhance the long-term
value of the Property:
(i) lease or license to operate golf
courses;
(ii) lease or license to operate golf
professionals' shops;
(iii) lease or license to operate golf
driving ranges;
(iv) lease or license to operate hotel and
conference facilities; and
(v) lease or license to operate any other
portions (but not the entirety) of the Property customarily
associated with or incidental to the operation of the golf
course which provide for an annual lease or license payment of
in excess of $25,000 (which amount shall be increased by
increases in the CPI from the Commencement Date).
(b) Terms of Leases. Each lease with respect to the Property
shall be subject and subordinate to the lien of the Lender in the Property. No
lease made as permitted by this
66
Section 12.2 shall affect or reduce any of the obligations of Borrower
hereunder, and all such obligations shall continue in full force and effect as
if no lease had been made. No lease shall impose any additional obligations on
Lender under this Agreement.
(c) Copies. Borrower shall, not less than sixty (60) days
prior to any proposed assignment or lease, deliver to Lender written notice of
its intent to assign or lease, which notice shall identify the intended assignee
or sublessee by name and address, shall specify the effective date of the
intended assignment or lease, and shall be accompanied by an exact copy of the
proposed assignment or lease. Borrower shall provide Lender with such additional
information or documents reasonably requested by Lender with respect to the
proposed transaction and the proposed assignee or subtenant, and an opportunity
to meet and interview the proposed assignee or subtenant, if requested.
(d) Assignment of Rights in Leases. As security for
performance of its obligations under this Agreement, Borrower hereby grants,
conveys and assigns to Lender all right, title and interest of Borrower in and
to all leases now in existence or hereinafter entered into for any or all of the
Property, and all extensions, modifications and renewals thereof and all rents,
issues and profits therefrom. Lender hereby grants to Borrower a license to
collect and enjoy all rents and other sums of money payable under any lease of
any of the Property; provided, however, that Lender shall have the absolute
right at any time after the occurrence and continuance of an Event of Default
upon notice to Borrower and any subtenants to revoke said license and to collect
such rents and sums of money and to retain the same. Borrower shall not (i)
consent to, cause or allow any material modification or alteration of any of the
terms, conditions or covenants of any of the leases or the termination thereof,
without the prior written approval of Lender nor (ii) accept any rents (other
than customary security deposits) more than ninety (90) days in advance of the
accrual thereof nor permit anything to be done, the doing of which, nor omit or
refrain from doing anything, the omission of which, will or could be a breach of
or default in the terms of any of the leases.
(e) Licenses, Etc. For purposes of this Section 12.2, leases
shall be deemed to include any licenses, concession arrangements, management
contracts (except to an Affiliate of the Lessee) or other arrangements relating
to the possession or use of all or any part of the Property.
12.3 Transfers. No assignment or lease shall in any way impair
the continuing primary liability of Borrower hereunder, as a principal and not
as a surety or guarantor, and no consent to any assignment or lease in a
particular instance shall be deemed to be a waiver of the prohibition set forth
in Section 12.1. Any assignment or other transfer of all or any portion of
Borrower's interest in the Property in contravention
67
of the terms of this Agreement shall be voidable at Lender's option. Anything in
this Agreement to the contrary notwithstanding, Borrower shall not lease all or
any portion of the Property which is inconsistent with Borrower's obligation to
maximize the long-term value of the Property, nor shall Lender withhold its
consent to any assignment or sublease of the Property which is consistent with
such obligation.
12.4 REIT Limitations. Anything contained in this Agreement to
the contrary notwithstanding, Borrower shall not (i) lease or assign or enter
into other arrangements such that the amounts to be paid by the sublessee or
assignee thereunder would be based, in whole or in part, on the income or
profits derived by the business activities of the sublessee or assignee; (ii)
lease or assign the Property or this Agreement to any person that Lender owns,
directly or indirectly (by applying constructive ownership rules set forth in
Section 856(d)(5) of the Code), a 10% or greater interest; or (iii) lease or
assign the Property or this Agreement in any other manner or otherwise derive
any income which could cause any portion of the amounts received by Lender
pursuant to this Agreement or any lease to fail to qualify as "interest on
obligations secured by mortgages on real property, or on interests in real
property" within the meaning of Section 856(c)(3)(B) of the Code, or which could
cause any other income received by Lender to fail to qualify as income described
in Section 856(c)(2) of the Code. The requirements of this Section 12.4 shall
likewise apply to any further subleasing by any subtenant.
12.5 Management Agreement. Borrower shall not enter into any
management agreement that provides for the management and operation of the
Innisbrook Property by an unaffiliated third party without the prior written
consent of Lender, which consent shall not be unreasonably withheld. Borrower
agrees not to terminate or materially modify the Master Lease - Innisbrook or
the Westin Management Agreement or any interest therein without the prior
written consent of Lender, which consent shall not be unreasonably withheld or
delayed. Any subsequent manager of the Innisbrook Property shall be a
first-class upscale hotel operator with relevant experience in the operation and
management of first-class golf facilities.
ARTICLE XIII
ARBITRATION
13.1 Arbitration. In each case specified in this Agreement in
which it shall become necessary to resort to arbitration, such arbitration shall
be determined as provided in this Section 13.1. The party desiring such
arbitration shall give notice to that effect to the other party, and an
arbitrator shall be selected by mutual agreement of the parties, or if they
cannot agree within thirty (30) days of such notice, by appointment made by the
American Arbitration Association ("AAA") from among the members of its panels
who are qualified and who
68
have experience in resolving matters of a nature similar to the matter to be
resolved by arbitration.
13.2 Arbitration Procedures. In any arbitration commenced
pursuant to Section 13.1 a single arbitrator shall be designated and shall
resolve the dispute. The arbitrator's decision shall be binding on all parties
and shall not be subject to further review or appeal except as otherwise allowed
by applicable law. Upon the failure of either party (the "noncomplying party")
to comply with his decision, the arbitrator shall be empowered, at the request
of the other party, to order such compliance by the non-complying party and to
supervise or arrange for the supervision of the non-complying party. To the
maximum extent practicable, the arbitrator and the parties, and the AAA if
applicable, shall take any action necessary to insure that the arbitration shall
be concluded within ninety (90) days of the filing of such dispute. The fees and
expenses of the arbitrator shall be shared equally by Lender and Borrower except
as otherwise specified above in this Section 13.2. Unless otherwise agreed in
writing by the parties or required by the arbitrator or AAA, if applicable,
arbitration proceedings hereunder shall be conducted in the State.
Notwithstanding formal rules of evidence, each party may submit such evidence as
each party deems appropriate to support its position and the arbitrator shall
have access to and right to examine all books and records of Lender and Borrower
regarding the Property during the arbitration.
ARTICLE XIV
LENDER'S RIGHT TO PLEDGE THE NOTES; BORROWER'S AND LENDER'S
RIGHT OF FIRST OFFER
14.1 Lender May Grant Liens. Without the consent of Borrower,
Lender may, from time to time, directly or indirectly, create or otherwise cause
to exist any lien on, or assignment of, its interest in the Loan, the Notes, or
any portion thereof or interest therein, whether to secure any borrowing or
other means of financing or refinancing (the holder of any such assignment or
lien, a "Lender Assignee"). Upon Lender's reasonable request, Borrower shall
provide written acknowledgement of any such assignment to any Lender Assignee.
Following the Closing Date, Lender intends to assign its interest in the Loan
and the Notes to NationsBank, N.A. as agent. In connection therewith, Borrower
agrees to provide to NationsBank, N.A., as agent, a Phase I Environmental Report
Certified to NationsBank, N.A., as agent, in conformity with the reasonable
requirements of NationsBank, N.A. Borrower shall pay the first $10,000 of the
cost thereof and any amounts in excess thereof shall be paid equally by Borrower
and Lender.
14.2 Borrower's Right of First Offer to Purchase. Except for
assignments permitted or contemplated by Section 14.1, including conveyances by
any lender following the exercise of any remedies it may have, and excluding any
financing transactions
69
wherein Lender retains any interest in a Note, if Lender intends to sell a Note,
and provided no Event of Default then exists, Borrower shall have a right of
first offer to purchase a Note ("Borrower's Right of First Offer to Purchase")
on the terms and conditions at which Lender proposes to sell the Note to an
unaffiliated third party. Lender shall give Borrower written notice of its
intent to sell and shall indicate the terms and conditions (including the sale
price) upon which Lender intends to sell such Note to a third party. Borrower
shall thereafter have sixty (60) days to elect in writing to purchase such Note
on the terms and conditions set forth in the notice provided by Lender to
Borrower. If Borrower does not elect to purchase such Note, then Lender shall be
free to sell the Note to a third party for a period of two hundred seventy (270)
days. However, if the price at which Lender intends to sell the Note to a third
party is less than 95% of the price set forth in the notice provided by Lender
to Borrower or otherwise are on terms which are materially more favorable than
the terms and conditions set forth in the notice, then Lender shall again offer
Borrower the right to acquire the Note upon the same terms and conditions,
provided that Borrower shall have only thirty (30) days thereafter to complete
the acquisition at such price, terms and conditions.
14.3 Lender's Right of First Offer to Purchase. If
Borrower intends to sell the Innisbrook Property, Borrower shall have a right
of first offer to purchase the Innisbrook Property ("Lender's Right of First
Offer to Purchase") on the terms and conditions at which Borrower proposes to
sell the Innisbrook Property to an unaffiliated third party. Borrower shall
give Lender written notice of its intent to sell and shall indicate the terms
and conditions (including the sale price) upon which Borrower intends to sell
the Innisbrook Property to a third party. Lender shall thereafter have
sixty (60) days to elect in writing to purchase the Innisbrook Property on the
terms and conditions set forth in the notice provided by Borrower to Lender. If
Lender does not elect to purchase the Innisbrook Property, then Borrower shall
be free to sell the Innisbrook Property to a third party for a period of two
hundred seventy (270) days. However, if the price at which Borrower intends to
sell the Innisbrook Property to a third party is less than 95% of the price set
forth in the notice provided by Borrower to Lender or otherwise are on terms
which are materially more favorable than the terms and conditions set forth
in the notice, then Borrower shall again offer Lender the right to acquire the
Innisbrook Property upon the same terms and conditions, provided that Lender
shall have only thirty (30) days thereafter to complete the acquisition at such
price, terms and conditions.
ARTICLE XV
INDEMNIFICATION
15.1 Borrower's Indemnification of Lender. Except as otherwise
provided in Section 6.5(b) and notwithstanding the existence of any insurance
provided for in Article VII, and
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without regard to the policy limits of any such insurance, Borrower will
protect, indemnify, save harmless and defend any Lender Indemnitee from and
against all liabilities, obligations, claims, actual damages (but excluding
consequential damages), penalties, causes of action, costs and expenses
(including reasonable attorneys' fees and expenses), to the extent permitted by
law, imposed upon or incurred by or asserted against any Lender Indemnitee by
reason of:
(a) any accident, injury to or death of persons or loss of or
damage to property occurring on or about the Property or adjoining property,
including, but not limited to, any accident, injury to or death of Person or
loss of or damage to property resulting from golf balls, golf clubs, golf shoes,
lawn mowers or other equipment, pesticides, fertilizers or other substances,
golf carts, tractors or other motorized vehicles present on or adjacent to the
Property;
(b) any use, misuse, non-use, condition, maintenance or repair
of the Property;
(c) any Impositions (which are the obligations of Borrower to
pay pursuant to the applicable provisions of this Agreement);
(d) any failure on the part of Borrower to perform or comply
with any of the terms of this Agreement;
(e) any so-called "dram shop" liability associated with the
sale and/or consumption of alcohol at the Property;
(f) the non-performance of any of the terms and provisions of
any and all existing and future leases of the Property to be performed by the
landlord (Borrower) thereunder;
(g) the negligence or alleged negligence of Lender with
respect to the Property;
(h) any liability Lender may incur or suffer as a result of
any permitted contest by Borrower pursuant to Section 6.12;
(i) any other loss, damage or liability to any Lender
Indemnitee arising out of this Agreement or in connection herewith, unless such
suit, claim or damage is caused by the gross negligence or willful misconduct of
such Lender Indemnitee.
15.2 Lender's Indemnification of Borrower. Lender shall
protect, indemnify, save harmless and defend Borrower from and against all
liabilities, obligations, claims, actual or consequential damages, penalties,
causes of action, costs and expenses (including reasonable attorneys' fees and
expenses)
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imposed upon or incurred by or asserted against Borrower as a result of Lender's
gross negligence or willful misconduct.
15.3 Mechanics of Indemnification. As soon as reasonably
practicable after receipt by the indemnified party of notice of any liability or
claim incurred by or asserted against the indemnified party that is subject to
indemnification under this Article XV, the indemnified party shall give notice
thereof to the indemnifying party. The indemnified party may at its option
demand indemnity under this Article XV as soon as a claim has been threatened by
a third party, regardless of whether an actual loss has been suffered, so long
as the indemnified party shall in good faith determine that such claim is not
frivolous and that the indemnified party may be liable for, or otherwise incur,
a loss as a result thereof and shall give notice of such determination to the
indemnifying party. The indemnified party shall permit the indemnifying party,
at its option and expense, to assume the defense of any such claim by counsel
selected by the indemnifying party and reasonably satisfactory to the
indemnified party, and to settle or otherwise dispose of the same; provided,
however, that the indemnified party may at all times participate in such defense
at its expense, and provided further, however, that the indemnifying party shall
not, in defense of any such claim, except with the prior written consent of the
indemnified party, consent to the entry of any judgment or to enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff in question to the indemnified party and its
affiliates a release of all liabilities in respect of such claims, or that does
not result only in the payment of money damages by the indemnifying party. If
the indemnifying party shall fail to undertake such defense within thirty (30)
days after such notice, or within such shorter time as may be reasonable under
the circumstances, then the indemnified party shall have the right to undertake
the defense, compromise or settlement of such liability or claim on behalf of
and for the account of the indemnifying party.
15.4 Survival of Indemnification Obligations; Available
Insurance Proceeds. Borrower's or Lender's liability for a breach of the
provisions of this Article XV arising during the term hereof shall survive any
termination of this Agreement. Notwithstanding anything herein to the contrary,
each party agrees to look first to the available proceeds from any insurance it
carries in connection with the Property prior to seeking indemnification or
otherwise seeking to recover any amounts to compensate a party for its damages
and then to seek indemnification only to the extent of any loss not covered by
their available insurance proceeds.
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ARTICLE XVI
MISCELLANEOUS
16.1 Notices. All notices, demands, requests, consents,
approvals and other communications hereunder shall be in writing and delivered
or mailed (by registered or certified mail, return receipt requested and postage
prepaid), addressed to the respective parties, as set forth below:
If to Lender:
Golf Trust of America, L.P.
14 North Adger's Wharf
Charleston, South Carolina 29401
Tel.: (803) 723-4653
Fax: (803) 723-0479
Attn: W. Bradley Blair, II
Copy to:
O'Melveny & Myers LLP
Embarcadero Center West
275 Battery Street
San Francisco, California 94111
Attn: Peter T. Healy, Esq.
Tel.: (415) 984-8833
Fax: (415) 984-8701
If to the Borrower:
Mr. Merrick R. Kleeman
Starwood Capital Group, L.P.
Three Pickwick Plaza, Ste. 250
Greenwich, Connecticut 06830
Tel.: 203-861-2100
Fax: 203-861-2101
Copy to:
James B. Carlson, Esq.
Mayer, Brown & Platt
1675 Broadway, Suite 1900
New York, New York 10019
Tel.: 212-506-2515
Fax: 212-262-1910
16.2 Authority to File Notices. Borrower irrevocably appoints
Lender as its attorney-in-fact, with full power of substitution, to file for
record, at Borrower's cost and expense
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and in Borrower's name, any notices of completion, notices of cessation of
labor, or any other notices that Lender considers necessary or desirable to
protect its security.
16.3 Inconsistencies with Loan Documents. In the event of any
inconsistencies between the terms of this Agreement and any terms of any of the
Loan Documents, the terms of this Agreement shall govern and prevail.
16.4 No Waiver; Remedies Cumulative. No disbursement of
proceeds of the Loan shall constitute a waiver of any conditions to Lender's
obligation to make further disbursements, and if Borrower is unable to satisfy
any such conditions, the existence of any such waiver shall not preclude Lender
from thereafter declaring such inability to constitute a default under this
Agreement. No failure or delay on the part of Lender in the exercise of any
power, right or privilege hereunder or under any other Loan Document shall
impair such power, right or privilege or be construed to be a waiver of any
default or acquiescence therein, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege. All rights and remedies existing under this
Agreement and the other Loan Documents are cumulative to and not exclusive of
any rights or remedies provided by law or otherwise available.
16.5 Lender Approval of Instruments and Parties. All
proceedings taken in accordance with transactions provided for herein; all
waivers of lien, surveys, appraisals and documents required or contemplated by
this Agreement and the Persons responsible for the execution and preparation
thereof shall be satisfactory to, and subject to approval by, Lender. Lender's
counsel shall be provided with copies of all documents which they may reasonably
request in connection with this Agreement.
16.6 Lender Determination of Facts. Lender shall at all times
be free to hire such independent consultants as it deems reasonably necessary to
independently establish the existence or nonexistence of any fact or facts, the
existence or nonexistence of which is a condition of this Agreement or of any
disbursement of Loan proceeds hereunder. The costs of such consultants are to be
paid by Borrower, provided such consultants are hired in the ordinary course of
Lender's business and similar consultants are generally engaged to review all
properties in which Lender owns a fee, leasehold or mortgagee's interest.
Provided no Event of Default then exists (in which case the foregoing limitation
shall not apply) the annual cost of Lender's regular consultants shall not
exceed on average Two Thousand Five Hundred Dollars ($2,500) per year, which
amount shall be increased to reflect increases in the CPI from the date hereof.
16.7 Incorporation of Preamble, Recitals and Exhibits. The
preamble, recitals and exhibits hereto are hereby incorporated into this
Agreement and made a part hereof.
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16.8 Entire Agreement. This Agreement and the other Loan
Documents constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and thereof and supersedes all prior
agreements between the parties with respect to the matters contained in this
Agreement and the other Loan Documents. All prior or contemporaneous
understandings, oral representations or agreements had among the parties with
respect to this subject matter are merged and contained in this Agreement and
the other Loan Documents.
16.9 Further Assurances. Borrower shall execute and deliver
from time to time, promptly after any request therefor by Lender, any and all
instruments, agreements and documents and shall take such other action as may be
necessary or desirable in the opinion of Lender to maintain, perfect or insure
Lender's security provided for herein and in the other Loan Documents, including
the execution of UCC-1 renewal statements, the execution of such amendments to
the Deed of Trust and the other Loan Documents, the delivery of such
endorsements to the Title Company and any and all documents or instruments in
respect of any revenues from the Property, all as Lender shall reasonably
require, and shall pay all fees and expenses (including reasonable attorneys'
fees) related thereto or incurred by Lender in connection therewith.
16.10 Changes, Waivers, Discharge and Modifications in
Writing. No provision of this Agreement may be changed, waived, discharged or
terminated except by an instrument in writing signed by the party against whom
enforcement of the change, waiver, discharge or termination is sought.
16.11 Choice of Law. THIS AGREEMENT AND THE TRANSACTION
CONTEMPLATED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
16.12 Disbursements in Excess of Loan Amount. If
the total disbursements by Lender exceed the amount of the Loan, to the extent
permitted by the laws of the State of New York, the total of all disbursements
shall be secured by the Loan Documents. All other sums expended by Lender
pursuant to this Agreement or any other Loan Documents shall be deemed to
have been paid to Borrower and shall be secured by the Loan Documents. Funds
advanced in the reasonable exercise of Lender's judgment that the same are
needed to complete the Improvements or to protect its security are to be deemed
obligatory advances hereunder and are to be added to the total indebtedness due
under the Note and secured by the Loan Documents and said indebtedness shall be
increased accordingly.
16.13 Counterparts. This Agreement and all other Loan
Documents may be executed in any number of counterparts each of which shall be
deemed an original, but all such counterparts together shall constitute but one
agreement. Signature and acknowledgement pages may be detached from the
counterparts and
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attached to a single copy of the document to physically form one document.
16.14 Time is of the Essence. Time is of the essence of this
Agreement.
16.15 Attorneys' Fees. For the purpose of this Agreement and
the other Loan Documents, the terms "attorneys' fees" and "attorneys' fees and
costs" shall each mean the fees and expenses of counsel to the parties hereto,
which may include printing, photostating, duplicating and other expenses, air
freight charges, and fees billed for law clerks, paralegals, librarians and
others not admitted to the bar but performing services under the supervision of
an attorney. The terms "attorneys' fees" and "attorneys' fees and costs" shall
also each include all such fees and expenses incurred with respect to appeals,
arbitrations and bankruptcy proceedings, and whether or not any action or
proceeding is brought with respect to the matter for which said fees and
expenses were incurred and shall also include all such fees and expenses
incurred in enforcing any judgment. In the event of any dispute between the
parties hereto involving the covenants or conditions contained in this Agreement
or arising out of the subject matter of this Lease, the prevailing party shall
be entitled to recover against the other party reasonable attorneys' fees and
court costs.
16.16 Severability. Should any portion of this Agreement be
declared invalid and unenforceable, then such portion shall be deemed to be
severed from this Agreement and shall not affect the remainder thereof.
16.17 Interest Rate Limitation. It is the intent of Borrower
and Lender in the execution of this Agreement and the other Loan Documents that
the Loans be exempt from the usury laws of the State of New York. In the event
that, for any reason, it should be determined that the New York usury law is
applicable to the Loans, Lender and Borrower stipulate and agree that none of
the terms and provisions contained herein or in any of the other Loan Documents
shall ever be construed to create a contract for the use, forbearance or
detention of money requiring payment of interest at a rate in excess of the
maximum interest rate permitted to be charged by the laws of the State of New
York. In such event, if Lender shall collect any monies which are deemed to
constitute interest which would otherwise increase the effective interest rate
on the Loans to a rate in excess of the maximum interest rate permitted to be
charged by the laws of the State of New York, all such sums deemed to constitute
interest in excess of such maximum rate shall, at the option of Lender, be
credited to the payment of sums due hereunder or under the other Loan Documents
or shall be returned to Borrower.
16.18 Brokers. Borrower hereby represents and warrants to
Lender that there are no brokerage commissions or finders' fees due or claimed
by any party to be due in connection
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with or with respect to the transaction contemplated hereby as a result of any
agreements or understandings, including alleged agreements and understandings,
with Borrower or any affiliate of Borrower or anyone claiming to represent
Borrower or any affiliate of Borrower. Lender hereby represents and warrants to
Borrower that there are no brokerage commissions or finders' fees due or claimed
by any party to be due in connection with or with respect to the transaction
contemplated hereby as a result of any agreements or understandings, including
alleged agreements and understandings, with Lender or any affiliate of Lender or
anyone claiming to represent Lender or any affiliate of Lender.
16.19 Non-Recourse as to Lender and Borrower.
(a) Anything contained herein to the contrary notwithstanding,
any claim based on or in respect of any liability of Lender under this Agreement
shall be enforced only against Lender's interest in the Collateral and not
against any other assets, properties or funds of (a) Lender, (b) any director,
officer, general partner, limited partner, employee or agent of Lender, or any
general partner of Lender, any of their respective general partners or
stockholders (or any legal representative, heir, estate, successor or assign of
any thereof), (c) any predecessor or successor partnership or corporation (or
other entity) of Lender, or any of their respective general partners, either
directly or through either Lender or their respective general partners or any
predecessor or successor partnership or corporation or their stockholders,
officers, directors, employees or agents (or other entity), or (d) any other
Person affiliated with any of the foregoing, or any director, officer, employee
or agent of any thereof. Borrower shall have the right of setoff against
payments due under the Note following a judicial determination of a court of
competent jurisdiction of Lender's liability for the breach of one or more of
its obligations hereunder.
(b) Except as expressly set forth below, the recourse of
Lender with respect to the obligations evidenced by the Note and the Loan
Documents shall be solely to the Property. Notwithstanding the foregoing,
nothing shall be deemed in any way to impair, limit or prejudice the rights of
Lender:
(i) in foreclosure proceedings or in any
ancillary proceedings brought to facilitate Lender's
foreclosure on the Property or the Pledged Lender's Shares or
any portion thereof, provided such exception shall not expand
Lender's ability to seek recourse against assets in which it
has no security interest;
(ii) to recover from Borrower any
condemnation or insurance proceeds attributable to the
Property which were not paid to Lender or used to restore the
Property in accordance with the terms of this Agreement;
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(iii) to recover from Borrower any rents,
profits, security deposits, advances, rebates, prepaid rents,
room or other hotel or golf course revenues or other similar
sums attributable to the Property collected by or for Borrower
following an Event of Default and not properly applied to the
reasonable fixed and operating expenses of the Property,
including payments of the Loan; and
(iv) to recover any damages as a result of
any fraud or misrepresentation by Borrower in connection with
the Property or the Loan Documents.
16.20 No Relationship. Lender shall in no event be construed
for any purpose to be a partner, landlord, fee owner, joint venturer or
associate of Borrower or of any tenant, operator, concessionaire or licensee of
Borrower with respect to the Property or any of the Other Leased Properties or
otherwise in the conduct of their respective businesses. Without limiting the
foregoing, Borrower confirms that this Agreement creates a creditor/debtor
relationship and not that of a landlord/tenant or partnership.
16.21 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the permitted heirs, executors, administrators,
legal representatives, successors and assigns of the parties.
16.22 Competition Between Lender and Borrower. Lender and
Borrower agree that neither party shall be restricted as to other relationships
and competition. Affiliates of Borrower shall be allowed to own, lease and/or
manage other golf courses or golf resorts that are not affiliated with Lender,
provided that such other ownership, leasing or management arrangements are
disclosed to Lender in writing. Subject to the provisions of Section 16.24,
Lender may acquire or own golf courses that may be geographically proximate to
one or more golf courses that Borrower or Affiliates of Borrower may own, manage
or lease.
16.23 Waiver of Jury Trial. BORROWER AND LENDER HEREBY AGREE
TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION
AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of
this waiver is intended to be all encompassing of any and all disputes that may
be filed in any court and that relate to the subject matter of this transaction,
including contract claims, tort claims, breach of duty claims, and all other
common law and statutory claims. Borrower and Lender acknowledge that this
waiver is a material inducement to enter into a business relationship, that each
has already relied on the waiver in entering into this Agreement, and that each
will continue to rely on the waiver in their related future dealings. Borrower
and
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Lender further warrant and represent that each has reviewed this waiver with its
legal counsel, and that each knowingly and voluntarily waives its jury trial
rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. In the event of litigation, this
Agreement may be filed as a written consent to a trial by the court.
16.24 Right of First Offer to Lease Additional Golf Courses
Proximate to the Innisbrook Property. Neither Lender nor any of its Affiliates,
either individually or with any other Person, shall at any time while the Loan
is outstanding own, lease, finance and/or manage an existing property containing
a golf course which is located within a twenty-five mile radius (the "Restricted
Radius") of the Innisbrook Premises except in accordance with the terms of this
Section 16.24. If at any time while the Loan is outstanding, Lender or any of
its Affiliates shall be given the opportunity with an unrelated third-party
(each such party, a "Third Party") to own or lease a golf course that is within
the Restricted Radius, which opportunity Lender or any of its Affiliates intends
to accept, then Lender shall send notice to Borrower of such opportunity
together with a copy of the proposed agreement or term sheet (the "Proposed
Agreement") between Lender or its Affiliate and the Third-Party pertaining to
such opportunity. Within forty-five days of delivery of such notice to Borrower,
Borrower and Lender shall endeavor in good faith to execute and deliver to the
other a mutually satisfactory agreement setting forth such agreement, in lieu of
the Third- Party, with the Lender or its Affiliate, on substantially the same
terms and conditions in the Proposed Agreement. If agreement is not executed and
delivered as aforesaid, then Lender and its Affiliates shall be free for a
period of two hundred and seventy days to enter into such opportunity with the
Third-Party on generally the same terms and conditions as set forth in the
Proposed Agreement. Notwithstanding the foregoing, if any opportunity is
presented to Lender or any of its Affiliates to own or lease a property that is
within the Restricted Area and that has an existing and operating golf course,
then Lender shall have no obligation to provide Borrower with the notice
specified in this Section or to comply with the other requirements of this
Section during the period that such property has a pre-existing arrangement with
another owner, operator or manager, provided, that upon the expiration or
termination of such pre-existing arrangement, Lender shall offer such
opportunity to Borrower in accordance with the terms of this Section.
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IN WITNESS WHEREOF, Lender and Borrower have caused this
Agreement to be duly executed and delivered as of the date first above written.
Borrower:
GOLF HOST RESORTS, INC.,
a Colorado corporation
By: /s/ Merrick R. Kleeman
Its: President
By:_____________________________
Its:____________________________
Lender:
GOLF TRUST OF AMERICA, L.P.,
a Delaware limited partnership
By: GTA GP, Inc., a Maryland corporation
Its: General Partner
By: /s/ W. Bradley Blair
Its: President
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