EXHIBIT 10.2 DEFENSE AND ESCROW AGREEMENTJoint Defense Agreement |
|
|
You are currently viewing: This Joint Defense Agreement involves
GOLF TRUST OF AMERICA INC | GOLF HOST RESORTS, INC., | GTA-IB, LLC, | GOLF TRUST OF AMERICA, L.P., | GOLF TRUST OF AMERICA, INC.,. RealDealDocs™ contains millions of easily searchable legal documents and clauses from top law firms. Search for free - click here. |
|
|
|
Search Joint Defense Agreement by:
EXHIBIT 10.2
DEFENSE AND ESCROW AGREEMENT
THIS DEFENSE AND ESCROW AGREEMENT (this “Agreement”) is made as of this 15th day of July , 2004 (the “Effective Date”), by and among (i) GOLF HOST RESORTS, INC., a Colorado corporation (“Borrower”), (ii) GTA-IB, LLC, a Florida limited liability company (“GTA-IB”), (iii) GOLF TRUST OF AMERICA, L.P., a Delaware limited partnership (“Lender”), (iv) GOLF TRUST OF AMERICA, INC., a Maryland corporation (“GTA Parent”), and (v) Chicago Title Insurance Company (“Escrow Agent”). GTA-IB, Lender and GTA Parent shall be referred to collectively as “GTA” in this Agreement.
THE PARTIES TO THIS AGREEMENT enter into this Agreement on the basis of the following facts, intentions and understandings:
A.
Simultaneously herewith, Borrower,
GTA-IB, Lender and certain other parties are entering into a Settlement
Agreement, dated as of the date hereof (the “Settlement Agreement”)
which, among other things, sets forth the respective rights and obligations of
Borrower and GTA-IB relating to (i) certain real and personal property (as more
particularly described in the Settlement Agreement, the “Property”),
(ii) Borrower’s obligations to Lender, regarding Borrower’s
obligations to Lender in connection with that certain loan in the original
principal amount of Seventy-Eight Million Nine Hundred Seventy-Five Thousand
Dollars ($78,975,000), and maturing on June 19, 2027 (the “Loan”),
and (iii) such other matters as more specifically set forth therein.
Capitalized terms used, but not otherwise defined herein, shall have the
meanings set forth in the Settlement Agreement.
B.
Borrower and other entities are currently
defending that certain lawsuits filed by William J. and Harriet J. Ball, et
al., on behalf of themselves and other similarly situated parties, in the
Circuit Court for the Sixth Judicial Circuit in Pinellas County, Florida, Case
Numbers 99-7532-CI-007 and/or 01-008582-CI-015 (the “Ball Claims”),
and may in the future defend other claims which are brought (or could have been
brought) against Borrower, and which derive from or relate to the same facts
and circumstances as the Ball Claims (collectively, such additional claims are
referred to as the “Related Claims,” each such claim is
individually a “Related Claim”) (collectively the Ball
Claims and the Related Claims and any appeals thereof are referred to as the
“Lawsuits;” and each of the Ball Claims and the Related
Claims (any an appeal thereof) is individually a “Lawsuit”).
The settlement of the Lawsuits may require, among other things, the granting of
certain operational benefits to those plaintiffs in the Lawsuits (or to those
who have intervened or seek to intervene in one or more Lawsuits)
(collectively, such plaintiffs and intervenors are referred to as the “Plaintiffs;”
and each is individually a “Plaintiff”), subject to the
settlement of the Lawsuits.
C.
Borrower also owns a parcel of real
property commonly known as “Parcel F” and which is more
particularly described on Exhibit A attached hereto (“Parcel F”).
D.
As a condition to GTA-IB’s and
Lender’s execution of the Settlement Agreement, GTA has required
(i) that Borrower and GTA agree upon their respective rights and
liabilities with respect to the Lawsuits and the defense thereof, and
(ii) that certain of the proceeds from any sale of Parcel F by
Borrower (or any affiliate thereof) be held in escrow pending distribution in
accordance with this Agreement.
E.
Borrower and GTA desire to enter into
this Agreement to establish their respective rights and obligations with
respect to (i) the defense of the Lawsuits, and (ii) the use and
distribution of proceeds from any sale of Parcel F by Borrower.
NOW THEREFORE, in consideration of the foregoing premises, the covenants in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower, GTA and Escrow Agent hereby agree as follows:
1.
Appointment of
Escrow Agent.
Escrow Agent is hereby appointed to act as escrow agent in accordance with the
terms of this Agreement, and Escrow Agent hereby accepts such
appointment. Escrow Agent shall have all the rights, powers, duties and
obligations set forth in this Agreement and no others.
2.
Defense of the
Lawsuits; Participation by GTA. Subject to the terms of the Settlement Agreement
and that certain operational benefits agreement dated July 15, 2004, by
and among Borrower, GTA-IB, Lender and Golf Hosts, Inc., a Florida corporation
(the “Operational Benefits
Agreement”),
Borrower shall conduct, control and be responsible for the defense and
potential settlement of the Lawsuits. GTA-IB shall have the right to
consult with Borrower regarding the Lawsuits and Borrower be obligated to keep
GTA-IB regularly informed on a current basis on the status of the Lawsuits, including,
without limitation, providing GTA-IB (and its counsel) with copies of all
pleadings filed and received, and deposition transcripts produced in connection
therewith, and Borrower and its counsel shall be generally available to answer
all questions of GTA-IB and its counsel relating to the Lawsuits.
Further, Borrower acknowledges and agrees that it shall cause its counsel of
record with respect to the Lawsuits, as well as any other counsel engaged by
Borrower with respect to the defense of the Lawsuits (together, “Borrower’s Counsel”) to promptly and regularly (i) inform Peter
T. Healy, Esq. and/or Michael Tubach, Esq. of O’Melveny & Myers LLP,
counsel to GTA (“OMM”) on a current basis on the
status of the Lawsuits and any negotiations regarding the settlement thereof,
and (ii) provide to OMM copies of all settlement proposals, correspondence and
documents related thereto and to the Lawsuits. Borrower shall also give
GTA-IB, Lender and OMM prior notice of all settlement discussions relating to the
Lawsuits and allow GTA-IB, Lender and their counsel to observe (and participate
in from time to time as is reasonably practicable) all such settlement
discussions. GTA-IB shall cooperate (at no economic cost to it or its
affiliates) and shall cause Lender to cooperate (at no economic cost to Lender
or its affiliates) in all reasonable respects in seeking to settle the
Lawsuits, which may include, in GTA-IB’s discretion, the offering of
certain rights, or the offering to alter certain existing rights, to use the
Innisbrook Golf Course, as provided in the Operational Benefits
Agreement. No such grants shall be made to a Plaintiff, except in the
event that Borrower and such Plaintiff execute and deliver a complete and final
settlement agreement, which provides for (i) the unconditional dismissal of
such Plaintiff’s Lawsuit or Lawsuits, any and all claims raised in or
related to such Plaintiff’s Lawsuit, with prejudice, and (ii) the
unconditional release of each of Guarantor, Borrower, GTA-IB, Lender, GTA
Parent and their respective affiliates, officers, directors, shareholders,
partners, members, successors, employees, and agents from any and all liability
for claims raised in or related to such Plaintiff’s Lawsuit (each such
settlement agreement, a “Lawsuit
Settlement Agreement”),
and subject to the further conditions set forth in Section 5.2
below. Furthermore, such settlements may include a waiver of rights of
Borrower to offset any sums owed to the
2
originally named Plaintiffs under the Innisbrook Rental
Pool Master Lease Agreement effective January 1, 2002, as amended.
3.
Proceeds from the
Sale of Parcel F.
The parties to this Agreement agree that any and all amounts received in
respect of any deposit, purchase price or purchase money mortgage payments in
connection with the sale or transfer or the proposed sale or transfer of Parcel
F (including, without limitation, any funds received from GTA in the event it
purchases Parcel F or purchaser reimbursement of sums advanced by Borrower
pursuant to Section 5.1(iii)), less: all of Borrower’s
reasonably and actually incurred third-party costs and expenses incurred solely
in connection with such sale, including, without limitation, all documentary,
filing, recording, conveyance, transfer and intangible taxes/fees; all charges
for or in connection with the recording and filing of any instrument or
document to be recorded or filed; costs and expenses of or related to the
issuance of the policies of title insurance; the premiums for the same and the
costs of any preliminary title reports and surveys required in connection with
the same; Borrower’s closing attorneys’ fees payable solely in
connection with services related to the sale and conveyance of title to Parcel
F; Borrower’s brokerage and conveyance fees payable to Lochmere Realty,
Inc. (which fees payable to Lockmere Realty, Inc. shall not exceed 6.87% of net
cash proceeds of the sale of Parcel F as and when paid by the purchaser of
Parcel F); and the buyer’s agent/broker’s acquisition fee/brokerage
fee, not to exceed Two Hundred Thousand Dollars ($200,000) in the aggregate
(such sale proceeds less all such costs and expenses deducted therefrom, are
hereinafter referred to as the “Proceeds”) shall be deposited
directly into the Escrow Account (as hereinafter defined), without demand,
deduction, offset or delay, and shall be disbursed only in accordance with the
terms of this Agreement, without demand, deduction, offset or delay.
Borrower shall not make or seek to cause any disbursement from the Escrow
Account to be made, directly or indirectly, except as expressly permitted by
this Agreement and only upon five (5) days’ prior written notice thereof
to Lender, in each instance, together with all relevant detail.
3.1
The Escrow Account. Escrow Agent shall establish
a collateral account, upon the availability of clear funds to be distributed
pursuant to this Agreement, in Borrower’s name at Bank of America,
National Association, which account shall be denominated “Bank of America
Golf Host Resorts, Inc. by Chicago Title Insurance Company as Escrow
Agent” for the benefit of Borrower and GTA (the “Escrow Account”). Borrower shall (i) pay on a regular and
current basis any and all fees and expenses incurred in connection with the
maintenance and the administration of the Escrow Account, and (ii) advise GTA
on a regular and current basis of Borrower’s satisfaction of such
obligations.
3.2
Control of Escrow
Account.
Escrow Agent shall administer the Escrow Account, shall be the sole signatory
on the Escrow Account and shall disburse the Proceeds only in accordance with
the terms of this Agreement and only upon five (5) days’ prior written
notice thereof to Lender, in each instance, together with all relevant detail.
Borrower shall have no right or ability to effect withdrawals from the Escrow
Account and shall have no right to exercise dominion or control over the Escrow
Account.
3.3
Notice to GTA. Prior to making any
distribution under this Agreement, including, without limitation, under
Sections 3 and 5, Escrow Agent shall notify GTA and its counsel in writing of
such intended distribution, in accordance with this Section 3, allowing
GTA reasonable opportunity to object to any such distribution.
3
4.
Proceeds Held in
Escrow.
4.1
Investment of
Proceeds.
Funds in the Escrow Account shall be invested and/or reinvested by Escrow Agent
exclusively in Permitted Investments. As used herein, “Permitted Investments” shall mean any of the following liquid
secondary market investments of excess cash with a maximum life of any one
security not to exceed one year: (a) marketable securities issued by the
United States of America and agencies thereof or guaranteed by the United
States of America; (b) marketable securities issued by any state of the United
States of America or any political subdivision of any such state or any public
instrumentality with a minimum rating of A1/P1;AA/Aa2 or MIG-1, VMIG1; (c)
certificates of deposit and time deposits issued by commercial banks organized
under the laws of the United States of America or any state thereof or by any
other domestic depository institution if such certificates of deposit are fully
insured by the Federal Deposit Insurance Corporation; (d) commercial paper
maturing not more than one year from the date of issue, and rated not lower
than “P-1” or the then-equivalent rating by Moody’s Investors
Service, “A-1” or the then-equivalent rating by Standard &
Poor’s Corporation, or the then equivalent rating by Fitch or Duff &
Phelps; (e) repurchase agreements with financial institutions organized under
the laws of the United States of America or any state thereof, provided that,
such institution is rated not lower than A1/P1; (f) auction rate products
provided that such products are rated not lower than A1/P1; (g) collateralized
mortgage obligations and asset backed securities provided that such obligations
or securities are rated not lower than A1/P1; (h) corporate debt obligations ,
provided that such obligations are rated not lower than double A (Aa) (AA) or
equivalent; and (i) shares of money market funds that have at least ninety-five
percent (95%) of their assets invested continuously in the types of investments
referred to in clauses (a) through (h) above. Any income earned on the
Escrow Account shall be held in the Escrow Account and shall constitute and be added
to the Proceeds, and all income taxes and other taxes thereon shall be
allocated to and shall be payable by Borrower in a prompt and timely
manner. To the extent that Borrower actually and unconditionally pays
such taxes, the amounts of Proceeds it receives shall be increased in an amount
sufficient to compensate Borrower (“grossed-up”) for such taxes paid,
provided that such amount shall not exceed the total amount of interest earned
on the Escrow Account.
5.
Use and Disposition
of Proceeds.
5.1
Closing Date
Disbursements.
On the date of the sale of Parcel F to a third party (the “Closing Date”) pursuant to a purchase and sale agreement (the
“Purchase Agreement”), Escrow Agent shall disburse
a portion of the Proceeds as follows:
(i)
FIRST, One Hundred Thousand Dollars
($100,000) to GTA-IB (or GTA-IB’s designee), in respect of fees and
related costs, including, without limitation, attorneys’ fees, incurred
by GTA-IB in connection with GTA-IB’s negotiation, preparation and review
of any iteration of a Parcel F Development Agreement, whether incurred before
or after the Effective Date (the “Parcel F Development Agreement”),
by and among GTA-IB, Borrower and Bayfair Innisbrook, L.L.C., a Florida limited
liability corporation or any other purchaser (subject to the provisions of
Section 8.2(b) of the Settlement Agreement) to be consented to by Lender
in writing, and all other documents attached thereto, regardless whether such
agreement is ultimately executed or is effective;
4
(ii)
SECOND, One Million Dollars ($1,000,000)
distributed 70% to Lender and 30% to Borrower; and
(iii)
THIRD, to Borrower (or Borrower’s
designee), (a) an amount respecting the reasonable and actually incurred
attorneys’ fees and related costs paid or payable to Borrower’s
Counsel in connection with the defense of the Lawsuits, which amount shall
not exceed Two Million Four Hundred Thousand Dollars ($2,400,000) in the
aggregate for such attorneys’ fees and related costs incurred for the
period from June 30, 2002 through the Effective Date (the “Maximum
Amount”); and (b) any reasonable and actually incurred attorneys’
fees and related costs paid or payable to Borrower’s Counsel in
connection with the defense of the Lawsuits which are incurred after the
Effective Date, which amount (as described in this subpart (b) of
Section 5.1(iii) shall not be subject to any maximum limitation.
Notwithstanding anything to the contrary in this Agreement, the Settlement
Agreement or the Operational Benefits Agreement, in the event that Borrower (or
its affiliates) recover attorneys’ fees and related costs (or a portion
thereof) from the Plaintiffs of the Lawsuits, such recovered amount shall be
fully disclosed to GTA-IB and shall automatically reduce the Maximum Amount
dollar for dollar to the extent received.
5.2
Disbursement of Net Proceeds. The Proceeds remaining after the disbursement
of the amounts set forth in Section 5.1 above (such remaining proceeds,
together with any amounts received by Borrower or Grantor relating to the
Litigation Interest (as defined in the Settlement Agreement), without offset,
are collectively referred to as the “Net Proceeds”) shall
continue to be held in the Escrow Account by Escrow Agent and shall be
disbursed to the persons set forth below in the order of priority set forth
immediately below within five (5) days after the date upon which GTA notifies
Escrow Agent in writing (the “Release Notice”) that it has
received evidence satisfactory to GTA, in its reasonable discretion, that a
Lawsuit has been settled by the parties thereto pursuant to a fully executed
settlement agreement and a properly filed dismissal with prejudice, wherein GTA
and its affiliates, agents, employees, officers, directors and members or
partners have been unconditionally released with prejudice with respect to the
Lawsuit and any and all claims or potential claims relating to the subject
matter thereof), or that the Lawsuit has been fully and finally adjudicated
(with no possibility of further appeal) (collectively, such settlement or full
and final adjudication are herein referred to as a “Final Lawsuit
Resolution”). GTA shall deliver the Release Notice in a
reasonably prompt manner upon GTA’s receipt of a Final Lawsuit
Resolution. Upon Escrow Agent’s receipt of a Release Notice, Escrow
Agent shall promptly disburse a portion of the Net Proceeds (without demand,
deduction, offset or delay) as shall be reasonably determined in good faith by
Borrower, to the extent available (provided, however, that Borrower
shall have (i) first considered reasonably and in good faith (and taking into
account such relevant facts and circumstances in making its determination) all
the relevant facts and circumstances, including, without limitation, the best
interests of GTA, Borrower and Borrower’s affiliates, and shall expressly
not act in the sole best interests of Borrower or Borrower’s affiliates,
and (ii) given prompt written notice of such determination to GTA-IB) in the
amounts and in the order set forth immediately below (together with concurrent
written notice to Lender):
(i)
FIRST, to Escrow Agent for any amounts
due and payable to Escrow Agent under this Agreement;
5
(ii)
SECOND,
(a) to Borrower, (i) an amount up to One Hundred Thousand Dollars ($100,000) to reimburse Borrower those certain engineering costs actually incurred by Borrower in connection with the sale of Parcel F and not otherwise reimbursed, and (ii) an amount up to Two Hundred Thousand Dollars ($200,000) to reimburse Borrower for its reasonable legal fees incurred after Borrower’s filing of that certain Parcel F Final Site Plan with Pinellas County, Florida, to the extent not otherwise reimbursed; and then,
(b) in the event any of the GTA Parties (as defined in the Settlement Agreement) are joined as parties to the Lawsuits by one or more of the Plaintiffs to the Lawsuits, an amount for the GTA Parties’ third party legal fees and costs incurred with respect to the Lawsuits, subject to a maximum aggregate amount of Fifty Thousand Dollars ($50,000);
(iii)
THIRD, to the Plaintiffs in a Lawsuit (or
to Borrower to the extent that Borrower has actually and unconditionally paid
such amount to Plaintiffs in a Lawsuit and has received and filed a dismissal
with prejudice with respect thereto) an amount reasonably determined by
Borrower in good faith to be paid pursuant to the Lawsuit Settlement
Agreement;
(iv)
FOURTH, subject to the provisions of
Section 5.2 of this Agreement, to the GTA Parties, all amounts which
represent the costs and expenses incurred by GTA and/or the GTA Parties,
including, without limitation, attorneys’ fees, other than in relation to
the Lawsuits, which Borrower and/or Guarantor are required to pay to the GTA
Parties pursuant to the indemnification provisions of Sections 5.1, 5.2 and
7.2(a) of the Settlement Agreement, provided that such amount when added to
Borrower’s Tax Payment shall not exceed the Indemnified Amount (as
defined in Section 10.3(c) of the Settlement Agreement);
(v)
FIFTH, subject to the provisions of
Section 5.2 of this Agreement, to the GTA Parties, an amount equal to any
and all costs, expenses (including, without limitation, legal and investigatory
fees, costs and expenses payable to Dechert LLP and/or Borrower’s Local
Counsel, but specifically excluding any counsel retained by any of the GTA
Parties (unless Dechert LLP shall not agree to defend, or is not able to defend
for ethical or other reasons, the GTA Parties and except as provided below),
liability, claim, loss, judgment or damage of any kind or nature arising out of
or in connection with the Lawsuits, not including any indirect or consequential
damages incurred by any of the GTA Parties;
(vi)
SIXTH, subject to the provisions of
Section 5.2 of this Agreement, to the GTA Parties, all amounts which
Borrower and/or Guarantor are required to pay to the GTA Parties pursuant to
the indemnification provisions of this Agreement, the Parcel F Development Agreement,
the Operational Benefits Agreement and that certain Joint Defense Agreement by
and among Borrower, Guarantor, GTA-IB, the GTA Parent and certain other parties
to the extent not otherwise paid to the GTA Parties; provided that such amount
paid under this Section 5.2(vi) when added to the amounts, if any,
distributed under Section 5.2(v) and the Borrower’s Tax Payment
shall not exceed the Indemnified Amount (excluding from the Indemnified Amount
Losses arising from the Lawsuits); and
6
(vii)
SEVENTH, subject to the provisions of
Section 5.2 of this Agreement, after any and all claims have been
satisfied and/or contingent or threatened claims have been reserved for in the
reasonable judgment of GTA and Borrower, Escrow Agent shall pay all remaining
Net Proceeds as follows: (1) seventy percent (70%) of such remaining
amount to GTA, and (2) thirty percent (30%) to Borrower; provided,
however, that if the amount paid under paragraph (iii) of this
Section 5.2 is less than Three Million Two Hundred Fifty Thousand Dollars
($3,250,000), then, prior to distributing the remaining Net Proceeds as earlier
provided in this paragraph (vii), Escrow Agent shall first distribute a
dollar amount which equals the difference between (a) Three Million Two Hundred
Fifty Thousand Dollars ($3,250,000), and (b) the amounts paid under paragraph
(iii) of this Section 5.2 as follows: (1) fifty percent (50%)
of such amount to Borrower, and (2) fifty percent (50%) to GTA.
5.3
Promissory Notes. In the event that any
portion of the Parcel F sales price shall be paid in the form of a promissory
note (any “Parcel F Note”) in favor of Borrower,
Lender shall have the right to (i) review the proposed Parcel F Note, the
credit and collateral securing the same, and other loan documents, and
(ii) provide commercially reasonable comments thereto regarding the terms
and conditions contained in such documents (the “GTA Financing Comments”), and Borrower shall, in a writing signed by
the purchaser of Parcel F, endorse to GTA-IB the Parcel F Note (and
assign all security and other legal instruments to GTA-IB) and deliver the
Parcel F Note (and the security and other legal instruments) to Escrow
Agent. GTA-IB and Borrower shall direct the payor under the Parcel F Note
to deliver all payments to Escrow Agent, which sums, for purposes of this
Agreement, shall be considered Proceeds. Borrower shall in good faith use
commercially reasonable efforts to incorporate the GTA Financing Comments into
the Parcel F Note and shall, prior to finalizing the Parcel F Note (and the
security and other legal instruments related thereto), notify Lender of which,
if any, of the GTA Financing Comments were not agreed to by the Parcel F buyer
on a good faith, commercially reasonable basis, and Lender shall have an
additional opportunity to provide its commercially reasonable comments to the
revised draft Parcel F Note and the security and other legal instruments (the
“Revised GTA Financing Comments”). Borrower shall be
entitled to disbursements from the Net Proceeds being held in the Escrow
Account, any and all reasonable and customary costs and expenses actually
incurred by Borrower in connection with the collection of any obligations under
the Parcel F Note, including, without limitation, reasonable attorneys’
fees and related costs. It is understood and agreed that Borrower shall
have sole responsibility for collecting amounts due under any Parcel F Note
(and/or under the security and other legal instruments related thereto) and
shall remit such collections to the Escrow Account; provided, however,
Borrower shall use diligent, good faith efforts to collect all sums due under
any Parcel F Note (and/or under the security and other legal instruments
related thereto) on or before the later of (i) two (2) years after the closing
of the sale of Parcel F, and (ii) December 31, 2005. GTA-IB shall
reasonably cooperate and provide Borrower with documents which may be
reasonably required by Borrower to enable or assist Borrower in collecting sums
due under any Parcel F Note (and/or under the security and other legal
instruments related thereto), which shall expressly not include a power of
attorney. Borrower shall have no liability to Lender for failure to collect
any amounts due under any Parcel F Note (and/or under the security and other
legal instruments related thereto), except to the extent resulting from
Borrower’s failure to diligently and in good faith seek to collect the
same in a commercially reasonable manner, gross negligence, self-dealing, any
willful misconduct or fraud of Borrower.
7
