TERMINATION AND RELEASE
AGREEMENT
This Termination and Release
Agreement (“ Agreement ”) is made as of the
28th day of September, 2006 (the “ Execution Date
”), by and among (i) GTA-IB, LLC, a Florida limited
liability company (“ Owner ”), (ii) Golf
Trust of America, Inc. (“GTA”), as guarantor with
respect to paragraphs 2, 4, 5, 6, 16, 17, 18, 19, 20, 21, 22,
23 and 27 herein, and (iii) Westin Hotel Management L.P., a
Delaware limited partnership, as successor in interest to Westin
Management Company South, a Delaware corporation (“
Operator, ” and together with Owner and GTA, the
“ Parties ”).
W I T N E S S E T
H :
WHEREAS, Owner and Operator are
parties to a Management Agreement, dated as of July 15, 2004 (the
“ Management Agreement ”), pursuant to which
Operator agreed to manage the resort known and designated as
“The Westin Innisbrook Golf Resort” and located near
Tarpon Springs, Florida (the “Resort”); and
WHEREAS, Owner and Operator have
mutually agreed to terminate the Management Agreement as of the
Termination Date (as defined below) and Operator has agreed to
continue to manage the Resort during the period from the Execution
Date to the Termination Date (the “ Transition Period
”), on and subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, for good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties hereto, intending to be legally
bound, agree as follows:
1.
Definitions . Capitalized terms used but not defined
herein shall have the meanings ascribed to them in the Management
Agreement.
2.
Operating Capital . Within three business days
following the Execution Date, Owner agrees to deposit in the
Operating Account the sum of $600,000 (the “ Initial
Capital Supplement ”), representing the Parties’
current estimate of the amount of additional working capital that
will be needed, when added to the existing cash resources in the
Operating Account and the Fund and taking into account the Parties
presently anticipated revenues and expenses of the Resort during
the Transition Period, to allow for the continued operation of the
Resort during the Transition Period and the payment of Fees and
Charges provided for in paragraph 4 below. In addition,
within three business days following the Execution Date, Owner
shall cause all funds (other than funds for existing leases through
December 31, 2006, previously approved capital expenditures and a
contingency reserve of $150,000) presently in the Fund to be
transferred to the Operating Account and Owner hereby authorizes
and instructs Operator to use all available amounts in the
Operating Account (including those amounts transferred from the
Fund) to pay expenses of operating the Resort during the Transition
Period. Operator agrees to use good faith efforts to manage
such expenses, including the continuation of the practice of
managing account payable deferrals during periods of limited cash,
to the extent reasonably feasible in light of the obligations of
the Resort to third parties (including Operator), in a manner
reasonably calculated to minimize or avoid the need for Owner to
supply additional funds to the Resort during the Transition Period
beyond the Initial Capital Supplement. Nevertheless, the
Parties acknowledge
and agree that Operator shall not be
required (a) to forego or delay payment of any amounts owed to
Operator or any of its Affiliates pursuant to the Management
Agreement during the Transition Period or in connection with the
termination of the Management Agreement on the Termination Date, or
(b) to advance any of its own funds in order to manage the
Resort during the Transition Period, and, accordingly, if the
actual needs of the Resort require additional cash resources for
Operator to operate the Resort during the Transition Period, Owner
agrees to deposit such additional funds in the Operating Account as
may actually and reasonably be needed by the Resort during the
Transition Period, with such deposit being made within five
business days following Operator’s written request for such
additional funds, accompanied by a reasonably detailed explanation
of the need for such additional funds (with any dispute as to the
amount of funds so required being submitted to resolution in
accordance with paragraph 19 below).
3.
Termination .
(a)
Subject to and in accordance with the terms hereof, the Management
Agreement will be terminated effective as of 11:59.59 P.M., Eastern
Standard Time on October 31, 2006 (the “
Termination Date ”). Notwithstanding the
termination of the Management Agreement, (i) provided that all
amounts due and payable to Operator under this Agreement have been
paid as and when due, Operator shall permit Owner to continue to
have access to Operator’s “SAP” accounting system
for the operation of the Resort between the Termination Date and
January 31, 2007, at a monthly charge of $2,000 (for a total
charge of $6,000, payable in advance on the Termination Date), and
on such reasonable terms and conditions as Operator may establish
to protect its proprietary rights in such accounting system
(additionally, Operator shall provide Owner with “view
only” access through March 31, 2007 to the
Resort’s historical SAP data), (ii) Operator shall
cooperate with Owner for up to 90 days following the Termination
Date to assist Owner in completing technical aspects of the
transition of management (including facilitating a transfer of the
Resort’s accounting data from the SAP system to Owner’s
replacement system upon the termination of Owner’s access to
the SAP system and making Kim Chappell, the current General Manager
of the Resort, available to Owner on a consulting basis), provided
that Owner reimburses Operator for actual personnel costs and other
reasonable costs incurred by Operator to perform its obligation to
cooperate with Owner pursuant to this paragraph 3(a)(ii), and
(iii) those provisions of the Management Agreement that either
expressly survive termination by their terms or that require action
by any of the parties thereto upon or subsequent to termination (as
such provisions may be modified herein), including without
limitation Section 4.5 of the Management Agreement and any
provisions related to indemnification and/or provisions requiring
reimbursement of expenses, shall survive the Termination
Date. As of the Execution Date, Operator is not aware of any
such indemnification obligations or unpaid reimbursable expenses,
except as set forth in the attached Exhibit A .
All references in the Management Agreement to the
“termination date” or the “date of
termination”, applicable pursuant to this Agreement, shall
mean the Termination Date defined herein.
(b)
During the Transition Period, the Management Agreement shall remain
in full force and effect, except as modified herein, and Operator
shall be entitled to receive all Management Fees and other fees and
charges required to be paid pursuant to the Management Agreement
during the Transition Period as and when due under the terms of the
Management Agreement.
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4.
Fees .
(a)
Without limiting Operator’s right to continue to be paid its
Management Fee and other fees and charges required to be paid
pursuant to the Management Agreement during the Transition Period,
Operator shall be entitled to receive from, and will be paid by
Owner, at the times and in the manner described below, all
outstanding (i) accrued and unpaid Management Fees (including
any portion of the previously accrued Base Fees as to which payment
may have been deferred pursuant to Section 3.5.4(a) of the
Management Agreement, and including any other accrued but unpaid
Base Fees and Incentive Fees; (ii) any accrued and unpaid fees
and charges described in Section 3.1 of the Management Agreement,
including the unpaid balance of the Marketing Fee for 2006 (but
excluding that portion of the Marketing Fee designated as the
“Golf Marketing Fund” pursuant to paragraph A of
that certain side letter between Operator and Owner dated as of
July 15, 2004) and the Central Reservations Fees accrued
and unpaid through the Termination Date; and (iii) any amounts
due and owing from Owner to Operator as a Reimbursable Expense
pursuant to the terms of the Management Agreement, net of any
amount due and owing from Operator to Owner (the amounts described
in clauses (i) through (iii) above being referred to collectively
as, the “ Fees and Charges ”).
Notwithstanding Section 3.1 of the Management Agreement, the
Marketing Fee for the months of November and December 2006 shall be
estimated utilizing the most recent operational forecast for the
resort dated September 18, 2006 wherein the projected year end
EBITDA number equals $370,292. All portions of the Fees and
Charges that are able to be determined and documented by Operator
as of the Termination Date, based on the financial information then
available, shall be paid to Operator on the Termination Date from
funds then in the Operating Account or otherwise supplied by
Owner. With respect to any portions of the Fees and Charges
that are not able to be finally determined as of the Termination
Date (the “ Additional Fees and Charges ”),
Operator shall deliver to Owner on or prior to the Termination Date
its reasonable estimate of such amounts, based upon the financial
information then available (the “ Estimated Additional
Fees and Charges ”) and the Parties shall follow the
following procedure to finalize and reconcile the calculation
payment of such amounts to Operator: (x) the Parties
shall deposit into escrow with a recognized national title
insurance company mutually acceptable to the Parties (the “
Escrow Holder ”), from funds then remaining in the
Operating Account, supplemented if necessary with additional funds
provided by Owner, an amount equal to 100% of the Estimated
Additional Fees and Charges, with instructions to the Escrow Holder
to disburse to Operator an amount equal to 90% of the Estimated
Additional Fees and Charges and to retain the remaining portion of
the deposited funds until the Parties have completed their
reconciliation of the Additional Fees and Charges; and
(y) within 30 days following the Termination Date, the Parties
shall make a final determination of the actual Additional Fees and
Charges, whereupon any remaining escrowed funds shall be
distributed as appropriate (and the Parties shall make any
necessary payments to each other) so that, following such
distribution or payment, Operator will have received the full
amount of the Fees and Charges and Owner will have received any
other escrowed funds.
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(b)
On the Termination Date, Operator shall transfer to an account or
accounts to be specified by Owner, by wire transfer of immediately
available funds, all of the funds in the Operating Account and all
other funds of Owner or the Resort under the control of Operator,
as of such date (collectively, the “ Owner Funds
”) in excess of the amounts to be paid to Operator or
deposited into escrow with the Escrow Holder pursuant to
paragraph 4(a) above.
(c)
Any dispute between Owner and Operator regarding any of the
calculations or adjustments contemplated in this paragraph 4
shall be resolved in accordance with paragraph 20
herein.
5.
Termination Fee . On or before the earlier to occur of
(a) March 31, 2008, or (b) the date of any Sale of
the Resort, Owner shall pay to Operator the Termination Fee,
calculated as of the Termination Date, pursuant to Section 4.4.2 of
the Management Agreement. At Operator’s request, the
Parties shall execute and record against the Resort a memorandum
confirming Owner’s obligation to pay Operator the Termination
Fee as described in this paragraph 5. Owner acknowledges
that its obligation to pay the Termination Fee shall survive the
Termination Date. For avoidance of doubt, the Parties confirm
that the Termination Fee does not include the amounts described in
Section 4.7.3 of the Management Agreement which were to be
paid to Operator under certain circumstances in connection with a
Sale of the Resort, and that such Section 4.7.3 shall be of no
further force or effect upon the termination of the Management
Agreement on the Termination Date.
6.
Guarantor . GTA unconditionally guarantees, as a
primary obligor and not merely as a surety, Owner’s
obligations to make payments to Operator pursuant to paragraphs 2,
4, and 5 herein (“Guaranty Obligations”). The
Operator shall not be required to exhaust any right or remedy or to
take any action against the Owner as a condition to collecting the
Guaranty Obligations from Guarantor. Owner and GTA agree
that, as between themselves, the Guaranty Obligations may be
declared to be due and payable for the purposes of this Agreement
notwithstanding any stay, injunction or other prohibition which may
prevent, delay or vitiate any declaration. GTA hereby acknowledges
that this guaranty and the Guaranty Obligations shall in no way be
affected, modified, diminished, impaired or terminated by reason of
any modifications, renewals, extensions or amendments of the
Management Agreement or this Agreement or any agreement, instrument
or document entered into pursuant thereto, whether or not notice
thereof is given to or consent is obtained from GTA. GTA
hereby waives the benefit of any guaranty or suretyship defenses
and of notice of the acceptance of this guaranty and presentment
and demand for payment, notice of non-payment, notice of dishonor,
protest, notice of protest, non-performance, non-observance and any
other defense, notice or demand to which GTA might be
entitled.
7.
Books and Records . During the Transition Period,
Operator shall make available to Owner (or its designee) the
financial books and records of the Resort in order to assist Owner
in preparing for the orderly transition of the Resort’s
operations as of the Termination Date. Such information shall
be provided in a prompt and reasonable manner so as not to disrupt
the operations of the Resort. On the Termination Date, such
books and records shall be assigned and transferred to Owner in
accordance with Section 4.5.5 of the Management
Agreement.
8.
Insurance . Owner and Operator acknowledge and agree
that the insurance coverage that Operator or any of its Affiliates
provides or maintains as of the Execution Date shall expire as of
the Termination Date (subject to any rights Owner or GTA may have
to make
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claims thereunder pursuant to the
terms thereof after the expiration of such insurance coverage), at
which time Owner shall be responsible for providing and maintaining
all such insurance coverage, except as set forth in paragraph 9
herein; provided, however , that, after the Termination
Date, Operator shall cooperate reasonably with Owner and take all
actions that Owner may reasonably request to make and process all
claims with respect to which the liability was incurred on or prior
to the Termination Date. For purposes of this paragraph 8,
Operator acknowledges and agrees that Troon Golf LLC is not an
Affiliate of Operator. Nothing herein shall modify any of the
obligations of the insurer under the insurance coverage except the
expiration date thereof as aforesaid.
9.
Employee Matters . Operator shall terminate, or shall
cause its Affiliates to terminate, at Operator’s sole cost
and expense, only the employment of the General Manager, and
Controller of the Resort, such termination to be effective as of
the Termination Date. Owner has informed Operator that Owner
intends to make employment offers to the Director of Sales and
Marketing and the Director of Human Resources prior to the
Termination Date, and Operator confirms that it has no objections
or reservations concerning, and consents to, Owner initiating such
employment offers. Owner shall remain the employer of all
Resort Personnel other than the General Manager and Controller,
through the Termination Date, and as of any date subsequent to the
Termination Date, Owner shall have sole authority to make, and
shall have sole responsibility and liability for, any employment
related decisions with respect to all Resort Personnel.
Notwithstanding the foregoing, the provisions of Section 2.6.4 of
the Management Agreement shall survive the Termination Date.
Additionally, nothing contained in the Management Agreement or this
paragraph 9 shall prohibit any Resort Personnel from
transferring, at any time, to another property owned or managed by
Operator or its Affiliates; provided, however, that during the
Transition Period and for the 12-month period commencing on the
Termination Date, Operator agrees that the management level
employees of Operator and its Affiliates shall not initiate contact
(or direct any other employee to initiate contact), with any Resort
Personnel (other than the General Manager and Controller) for the
purpose of soliciting such Resort Personnel to relocate from the
Resort to any other property owned or managed by Operator or its
Affiliates. For avoidance of doubt, the preceding sentence
shall not be construed to restrict or otherwise limit any transfer
or relocation of Resort Personnel that is initiated and
requeste
