OPTION TO PURCHASE AND RIGHT OF FIRST REFUSAL AGREEMENT
(GOLF TRUST OF AMERICA)
THIS OPTION TO PURCHASE AND RIGHT OF FIRST REFUSAL AGREEMENT (this
"Agreement") is entered as of the _______ day of ____________, 1997 (the
"Effective Date") by and between (i) Golf Trust of America, L.P., a Delaware
limited partnership (the "Partnership") and Golf Trust of America, Inc., a
Maryland corporation (the "REIT"), (collectively, the "Company") on the one
hand, and (ii) Xx. Xxxxx X. Xxxxx (together with his Affiliates (as
hereinafter defined), "The Legends Group").
THE PARTIES ENTER THIS AGREEMENT on the basis of the following
facts, understandings and intentions:
A. Xx. Xxxxx is actively engaged in various aspects of golf course and
real estate acquisition, development, management and operation, both
personally and for companies and joint ventures he controls
B. The Company has undertaken, or will concurrently with the public
offering of shares in the Company (the "Offering") undertake, a series of
transactions involving the Company and golf courses currently owned and/or
managed by, among others, The Legends Group (the "Formation Transactions").
C. Pursuant to the Formation Transactions the Partnership will acquire
ten (10) golf courses, including all of the golf courses in which Xx. Xxxxx
or The Legends Companies or their respective Affiliates own an interest, with
the exception of Xxxxx Harbor, an 18-hole golf course facility (the "Xxxxx
Harbor" course). The Xxxxx Harbor course is subject to a ground lease with a
short remaining term.
D. In the future, The Legends Companies may develop one or more
additional golf courses and/or may acquire one or more established, operating
golf courses, or with respect to the Xxxxx Harbor course, enter into a lease
amendment to extend the term of the lease or acquire the fee interest in such
course.
E. The Company's primary objective is to maximize cash available for
distribution and to enhance shareholder value through its partnership
interest in the Partnership by acquiring golf courses that meet the Company's
investment criteria and leasing such courses to third party operators.
F. The Legends Group and the Company have determined that, in
connection with the Formation Transactions and the Offering and as benefit to
the shareholders of the Company, it is desirable to set forth the terms and
conditions pursuant to which the Company will have an Option, as hereinafter
defined, and the Right of First Refusal, as hereinafter defined, with respect
to the Xxxxx Harbor course and any Future Courses, as hereinafter defined.
NOW, THEREFORE, in consideration of the mutual covenants and
promises of the parties, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. DEFINITIONS. The following terms as used in this Agreement
shall have the following meanings (applicable to both the singular and plural
forms of the terms defined):
a. "ACQUISITION AGREEMENT" shall mean a Contribution and
Leaseback Agreement substantially in the form of Exhibit 10.4 to the
Registration Statement, incorporating the terms and conditions of the Option
Notice, or the Option Notice, as applicable, and which shall include, without
limitation, a thirty (30)-day condition precedent or free-look provision.
b. "AFFILIATE" means (i) any other person or entity directly
or indirectly controlling, controlled by, or under common control with the
person or entity to which such term applies; and (ii) as to any natural
person, such person's spouse, or child, as well as the then-existing spouse
of any of the foregoing. In addition, as to any corporation or partnership,
any person with any of the foregoing relationships to any person in control
of such partnership as a general partner or otherwise or in control of such
corporation shall be deemed to be an Affiliate of such partnership or
corporation. For purposes of this Agreement, "CONTROL" as applied to any
person or entity means the possession, either directly or indirectly, of the
power to direct or cause the direction of the management, policies and
decision-making of such person or entity, whether through the ownership of
voting interests, by contract or otherwise. "Control" shall also include,
without limitation, the possession of direct or indirect equity or beneficial
interests in at least seventy-five percent (75%) of the profits or voting
control of any entity.
c. "BASIC BUSINESS TERMS" shall mean, at a minimum, the
following terms: (i) the sales price, (ii) the amount and terms of any seller
financing, (iii) the amount and terms of any assumable third party financing,
(iv) the state of title to be transferred, (v) the date for close of escrow,
(vi) the proration of closing costs and the allocation between buyer and
seller of any brokerage commissions, and (vii) all other material business
terms and conditions.
d. "CHANGE IN CONTROL" means a change in ownership or control
of the Company effected through either of the following transactions:
(1) the direct or indirect acquisition by any person or
related group of persons (other than the Company or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Company) of beneficial ownership (within the meaning of
Rule 13d-3 of the Securities Exchange Act of 1934) of securities
possessing more than twenty-five percent
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(25%) of the total combined voting power of the REIT's outstanding
securities pursuant to a tender or exchange offer made directly to the
REIT's stockholders which the REIT's Board of Directors (the "Board")
does not recommend such stockholders to accept; or
(2) a change in the composition of the Board over a
period of twenty-four (24) consecutive months or less such that a
majority of the Board members (rounded up to the next whole number)
ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or (B) have been
elected or nominated for election as Board members during such period by
at least two-thirds (2/3) of the Board members described in clause (A)
who were still in office at the time such election or nomination was
approved by the Board.
e. "COMPANY AFFILIATE" means any Affiliate of the Company.
f. "FUTURE COURSE" shall mean any golf course acquired,
developed or otherwise owned or controlled by The Legends Group other than
Xxxxx Harbor and other than any golf course subject to a Contribution and
Leaseback Agreement with the Partnership as of the Effective Date. If The
Legends Group acquires the fee interest in the Xxxxx Harbor course or if the
term of the existing Xxxxx Harbor lease, together with any applicable
extension options, is extended to a period in excess of 20 years, then at
such time the Xxxxx Harbor course shall be considered a "Future Course."
g. "INDEPENDENT DIRECTOR" shall mean a member of the Board of
Directors of the REIT who is defined as an "Independent Director" in the
charter documents of the REIT.
h. "NEGOTIATED PURCHASE PRICE FORMULA" shall mean the formula
described in EXHIBIT A hereto.
i. "OFFER NOTICE" shall mean a term sheet prepared by The
Legends Group and delivered to the Company indicating with respect to any
Future Course the terms and conditions upon which The Legends Group intends
to offer to Transfer the applicable Future Course.
j. "REGISTRATION STATEMENT" shall mean the Form S-11
Registration Statement under the Securities Act of 1933, Registration No.
333-15965, as the same may be amended or supplemented from time to time.
k. "TRANSFER" means the sale, long-term ground lease,
transfer of control or conveyance, by deed, assignment, quitclaim or
otherwise, whereby The Legends Group transfers its interest in the subject
property.
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2. GRANT OF OPTION TO PURCHASE. The Legends Group hereby grants
to the Company separate rights to elect to acquire one or more of the Future
Courses, separately or together, from time to time or at any time during the
Option Term, by giving written notice (the "Option Notice") to The Legends
Group at any time on or after the Option Term Commencement (as hereinafter
defined) with respect to each property, on all of the following terms and
conditions (the "Option"):
a. OPTION TERM. The term of the Option with respect to each
property (the "Option Term") shall be determined as follows.
(1) COMMENCEMENT. The Option Term shall commence on the
Option Term Commencement determined as follows:
(i) with respect to each Future Course developed by
Xx. Xxxxx and/or the Legends Group, the Option Term Commencement shall be the
fourth (4th) anniversary of the public opening of the subject course; and
(ii) with respect to each Future Course acquired as
an operating course by Xx. Xxxxx and/or the Legends Group, the Option Term
Commencement shall be the second (2nd) anniversary of the date of such
acquisition.
(2) TERMINATION. The Option Term with respect to each
property shall terminate on the earlier of (i) the tenth (10th) anniversary
of the Effective Date, or (ii) the conveyance of the subject property to a
third party in accordance with and subject to the terms and conditions hereof.
b. CONDITIONS. Exercise of the Option by the Company is
conditioned upon the Company not having received an Offer Notice prior to
delivery of the Option Notice to The Legends Group; PROVIDED, HOWEVER, that
if The Legends Group for any reason fails to Transfer the subject property to
a third party within the 9-Month Transfer Period (as hereinafter defined),
then Company's receipt of said Offer Notice shall not prevent the exercise of
this option.
c. PURCHASE. Subject to Paragraph 2.d below, upon delivery
of an Option Notice, the Company shall prepare and the parties shall execute
an Acquisition Agreement within thirty (30) business days. The purchase
price with respect to each property for which the Company gives an Option
Notice to The Legends Group shall be determined according to the Negotiated
Purchase Price Formula for the subject property.
d. FAILED NEGOTIATIONS. Notwithstanding Paragraph 2.c above,
if the parties negotiating in good faith are unable to reach a mutually
agreeable Negotiated Purchase Price Formula for the property referred to in
the Option Notice before the deadline referred to in Paragraph 2.c above,
then The Legends Group shall not be obligated to convey the subject property
to the Company pursuant to said Option Notice and the Company shall not
deliver any other Option Notice regarding such property to
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Owner for a period of 12 months following delivery of the former Option
Notice. Nothing in this Paragraph 2.d shall be construed to terminate the
Option Term.
3. GRANT OF RIGHT OF FIRST REFUSAL. The Legends Group hereby
grants to the Company separate rights of first refusal (each a "Right of
First Refusal") to purchase each of the Future Courses at the same price and
upon the same terms as are contained in the Offer Notice with respect to each
property.
a. TERM. The rights granted to the Company under this
Section 3 shall commence as of the Effective Date and shall terminate ten
(10) years thereafter, provided this Agreement shall automatically terminate
upon a Change in Control.
b. OFFER REQUIREMENTS. If, from time to time and at any
time, The Legends Group desires to make a Transfer of one or more of the
Future Courses to a third party unaffiliated with The Legends Group and
excepting transfers by will or transfers to any lineal descendent of Xx.
Xxxxx, The Legends Group shall first prepare and deliver an Offer Notice and
shall offer to the Company or a Company Affiliate, at the election of the
Company, the opportunity to purchase such property (the "Offered Property")
on the same terms and conditions as are contained in the Offer Notice. The
Company shall have thirty (30) days after receipt of the Offer Notice to
deliver to The Legends Group a written acceptance agreeing to purchase the
Offered Property on the terms and conditions set forth in the Offer Notice,
and otherwise in accordance with the terms and conditions set forth in the
Acquisition Agreement. Upon delivery of such acceptance, the parties shall
execute an Acquisition Agreement with respect to the Offered Property within
ten (10) business days.
c. SALES TO THIRD PARTIES. If the Company fails to elect to
purchase the Offered Property on the terms and conditions described herein,
then, during the nine (9) month period immediately following the expiration
of the thirty (30) day period provided in the immediately preceding Paragraph
(the "9-Month Transfer Period"), The Legends Group may make a Transfer of the
Offered Property to any third party on terms no more than five percent (5%)
more favorable to the third party than the terms and conditions contained in
the most recently delivered Offer Notice. The Legends Group shall not make
any Transfer of any Future Course to any third party unless such Transfer is
preceded by an Offer Notice as provided herein.
d. SUBSEQUENT OFFERS. If, upon the expiration of the 9-Month
Transfer Period, The Legends Group has not entered into a fully-executed
purchase agreement with a third party on terms permitted by Paragraph 3.c
above and recorded a grant deed to the Offered Property in favor of such
third party within thirty (30) days after the expiration of the 9-Month
Transfer Period, then prior to making a Transfer of all or any portion of the
Offered Property to a third party, The Legends Group must first deliver to
the Company another Offer Notice in accordance with Paragraph 3.b above. The
Company shall then have fifteen (15) days after receipt of such new Offer
Notice to accept the terms and conditions contained in the Offer Notice and
otherwise in
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accordance with the terms and conditions set forth in the Acquisition
Agreement. Upon acceptance of a Offer Notice by the Company, the parties
shall execute an Acquisition Agreement with respect to the Offered Property
within ten (10) business days.
e. TERMINATION OF RIGHT OF FIRST OFFER. If The Legends Group
makes a Transfer of the Offered Property to a third party pursuant to
Paragraph 3.c above, such third party shall take title to the Offered
Property free and clear of any right of the Company to purchase the Offered
Property, and this Agreement shall terminate and be of no further force or
effect as to that (and only that) Offered Property.
4. MISCELLANEOUS.
a. COMPLETE AGREEMENT; CONSTRUCTION. This Agreement, and the
other agreements and documents referred to herein, shall constitute the
entire agreement between the parties with respect to the subject matter
thereof and shall supersede all previous negotiations, commitments and
writings with respect to such subject matter.
b. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the jurisdiction of the State of
South Carolina without regard to the principles of conflicts of laws thereof
and venue respecting any dispute under this Agreement shall be the proper
court located in the State of South Carolina.
c. NOTICES. All notices and other communications required or
permitted hereunder shall be in writing, shall be deemed duly given upon
actual receipt, and shall be delivered (i) in person, (ii) by registered or
certified mail (air mail if addressed to an address outside of the country in
which mailed), postage prepaid, return receipt requested, or (iii) by
facsimile or other generally accepted means of electronic transmission
(provided that a copy of any notice delivered pursuant to this clause (iii)
shall also be sent pursuant to clause (ii)), addressed as follows (or to such
other addresses as may be specified by like notice to the other parties):
If to The Legends Group: Xx. Xxxxx X. Xxxxx
0000 Xxxxxxx Xxxxx
Xxxxxx Xxxxx, Xxxxx Xxxxxxxx 00000
If to the Company: Golf Trust of America, Inc.
000 Xxxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
d. AMENDMENTS. No amendment, modification or supplement to
this Agreement shall be binding on any of the parties hereto unless it is in
writing and signed by
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the parties in interest at the time of the modification, and further provided
any such modification is approved by a majority of the Independent Directors.
e. SUCCESSORS AND ASSIGNS. Neither this Agreement nor any
rights or obligations hereunder shall be assignable by a party to this
Agreement without the prior, express written consent of the other party.
This Agreement and all of the provisions hereof shall be binding upon and
inure to the benefit of the parties to this Agreement and their respective
successors and permitted assigns.
f. NO THIRD-PARTY BENEFICIARIES. This Agreement is solely
for the benefit of the parties to this Agreement and should not be deemed to
confer upon third parties any remedy, claim, liability, reimbursement, claims
or action or other right in excess of those existing without reference to
this Agreement.
g. TITLES AND HEADINGS. Titles and headings to sections and
paragraphs in this Agreement are inserted for the convenience of reference
only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
h. MAXIMUM LEGAL ENFORCEABILITY; TIME OF ESSENCE. Any
provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction. Without prejudice to any rights or remedies
otherwise available to any party to this Agreement, each party hereto
acknowledges that damages would not be an adequate remedy for any breach of
the provisions of this Agreement and agrees that the obligations of the
parties hereunder shall be specifically enforceable. Time shall be of the
essence as to each and every provision of this Agreement. The parties
understand and agree that the determination of the purchase price under the
option granted hereunder is subject to the parties agreement on the extent
and nature of the adjustments to both expenses and revenue and each party
agrees that given the subjective nature of such adjustments is not capable of
being determined by a third party and therefore the parties agree that a suit
for specific performance or damages is not appropriate if the parties
negotiating faith are unable to agree on such adjustments.
i. FURTHER ASSURANCES. The parties to this Agreement will
execute and deliver or cause the execution and delivery of such further
instruments and documents and will take such other actions as any other party
to the Agreement may reasonably request in order to effectuate the purpose of
this Agreement and to carry out the terms hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first written above.
"The Legends Group"
__________________________________
XXXXX X. XXXXX
"Company" GOLF TRUST OF AMERICA, L.P.
By GTA GP
General Partner
By: _______________________________
Name:
Title:
GOLF TRUST OF AMERICA, INC.
By _______________________________
Name:
Title:
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EXHIBIT A
NEGOTIATED PURCHASE PRICE FORMULA
A. NEGOTIATED PURCHASE PRICE FORMULA. The Negotiated Purchase Price shall
equal the Adjusted Net Operating Income divided by the Capitalization Rate.
B. DEFINITIONS. For purposes of this EXHIBIT A, the following terms shall
have the following meanings:
(1) "ADJUSTED NET OPERATING INCOME" means the Net Operating Income
divided by 1.135.
(2) "APPLICABLE TWELVE (12) MONTH PERIOD" means the twelve (12) month
period ending the calendar quarter immediately preceding the date the Option
Notice is given.
(3) "CAPITALIZATION RATE" shall mean the Company's First Call FFO plus
200 basis points.
(4) "COMPANY" means Golf Trust of America, Inc.
(5) "COMPANY'S FIRST CALL FFO" means the consensus FFO per share
estimate for the Company for the calendar year which includes the date the
Option Notice is given, subtracting the Company's capital expenditure reserve
per share as estimated for that year as such estimate is reported by First
Call (or, if First Call is no longer in general use within the securities
industry, by such other reporting service as is then in general use within
the securities industry) divided by the average of the Company's closing
share price for the thirty (30) trading days immediately preceding the date
the Option Notice is given.
(6) "GROSS OPERATING EXPENSES" means the gross operating expenses of the
Property for the Applicable Twelve (12) Month Period, calculated in
accordance with generally accepted accounting principles consistently
applied. For purposes of calculating Gross Operating Expenses, the Company
and The Legends Group shall negotiate in good faith to make such
discretionary adjustments on a line item basis to reflect stabilized Gross
Operating Expenses, which may include the following adjustments:
(a) annual capital replacement reserves shall be included;
(b) annual cash expenditures (including depreciation) for golf
carts shall be included;
(c) extraordinary expenditures (such as to repair storm damage)
which are not anticipated to recur in the ordinary course shall be
excluded;
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(d) other adjustments to reflect stabilized Gross Operating
Expenses;
(e) depreciation, amortization and debt service shall be excluded.
(7) "GROSS OPERATING REVENUE" means the gross operating revenue of the
Property, including revenue related to the golf course operations, food and
beverage operations and sale of merchandise, for the Applicable Twelve (12)
Month Period, calculated in accordance with generally accepted accounting
principles consistently applied. Gross Operating Revenue shall also be
subject to the Company and The Legends Group negotiating in good faith to
make such discretionary adjustments on a line item basis to reflect
stabilized Gross Operating Revenue.
(8) "NET OPERATING INCOME" means the Gross Operating Revenue of the
Property for the Applicable Twelve (12) Month Period LESS the Gross Operating
Expenses for the same period.
(9) "PROPERTY" means the property which is the subject of the Option
Notice.
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