PURCHASE AND SALE AGREEMENT

In addition to any definitions specified in the body of the Agreement, the following terms, when capitalized, shall, unless modified in the Agreement, have the following meaning:

 

1.1.  “Acquisition Committee” means the Committee that has been authorized by the FLCA Board to (i) obtain member consent to the transactions described herein; and (ii) form the Purchaser to acquire the Country Club Property and negotiate this Agreement.  The Acquisition Committee is comprised of Ed Berlin, Larry Welford, Ed Gillis, Jim Ford, Jerry Henderson and Dan Harris.

 

1.2.  “Arnold Palmer Designation” means any and all rights that Seller has to utilize the name “Arnold Palmer” in connection with the Golf Course, the Country Club, or any part thereof.

 

1.3.  “Bank Loan” means the bank loan obtained by the Purchaser and/or the FLCA to finance the transactions contemplated by this Agreement.

 

1.4.  “Bill of Sale” means the Bill of Sale in the form to be agreed upon by the Purchaser, the FLCC and Seller prior to the expiration of the Investigation Period.

 

1.5.  “Books and Records” means copies of all accounting, financial, tax, employment, sales, accounts payable and accounts receivable reports, and other records relating solely to the business of owning, operating, maintaining and/or managing the Country Club Property in Seller’s possession for the previous three (3) years.

 

1.6.  “Business Day” means any day other than a Saturday, Sunday or any United States federal legal holiday.

 

1.7.  “Calendar Day” means any day of the week including a Business Day.

 

1.8.  “Certificate of Non-Foreign Status” means a certificate regarding the non-foreign status of the Seller in the form to be agreed upon by the Seller and Purchaser prior to the expiration of the Investigation Period.

 

1.9.  “Closing Date” means the date on which the Closing of the transactions contemplated hereby occurs, which date shall be the earlier of (i) October 26, 2010, assuming all Conditions Precedent and all obligations imposed on the Purchaser and Seller as a condition to closing have been satisfied, or (ii) such date chosen by Purchaser, in its sole discretion for the completion of any Conditions Precedent, but not later than November 15, 2010.

 

1.10.  “Clubhouse” means the Country Club building currently used as a dining facility and all ancillary structures including, but not limited to, the adult swimming pool, parking facilities and out buildings associated with the Clubhouse.

 

1.11.  “Conditions Precedent” means all obligations imposed on either Seller or Purchaser which are to occur either prior to or at Closing.

 

1.12.  “Country Club” means all of Seller’s right, title and interest in the Fawn Lake Country Club, a private, member only country club owned and operated by Seller on the Fawn Lake Development in Spotsylvania, Virginia.

 

1.13.  “Country Club Employees” means all employees employed by Seller solely for County Club operations and also includes Jesse Dwyer, an employee shared by the Country Club and the FLCA.

 

1.14.  “Country Club Property” means all of the Real Property, Improvements, Golf Course, Country Club, Personal Property, Intangible Property, Contracts, Permits, to the extent assignable, the Arnold Palmer Designation, to the extent assignable, and Memberships and Membership Agreements as defined herein and/or reflected on the exhibits attached hereto.

 

1.15.  “Declaration” means the Declaration for Fawn Lake made by NTS/Virginia Development Company, dated July 16, 1990 and recorded in Deed Book 914, page 131 in the Clerk’s office of the Circuit Court of Spotsylvania County, Virginia on [_______________], as amended, corrected and supplemented by Exhibit B to the Declaration filed at Deed Book 951, page 244, a Corrected Declaration filed at Deed Book 951, page 249, an Amendment to Declaration filed at Deed Book 993, page 764, a Corrected Declaration filed at Deed Book 1328, page 555 and by a Supplemental Declaration filed at Deed Book 1741, page 784.

 

1.16.  “Due Diligence Materials” means all of the documents, agreements, studies, reports, maps, surveys, plans and specifications, architectural and engineering drawings, plans, specifications, as-built drawings, plats and maps, contracts to be identified during the Investigation Period by the Parties and then listed on Exhibit B (“Contracts”) and any other documents of the same or similar nature pertaining to the Country Club Property, which are in Seller’s possession and to be ma de available by Seller for Purchaser’s review, without warranty of any kind and excluding marketing, leasing, economic and proprietary studies of Seller.

 

1.17.  “Environmental Investigation” shall have the meaning given to such term in Section 4.1(c) of this Agreement.

 

1.18.  “Environmental Laws” means all federal, state or local laws, ordinances, codes, statutes, regulations, administrative rules, policies and orders, and other authorities, however designated, pertaining to the management, manufacture, possession, presence, use, generation, transportation, treatment, storage, disposal or Release (as herein defined) of Hazardous Substances and/or Hazardous Materials.

 

1.19.  “Fawn Lake Development” means the real estate development located in Spotsylvania County, Virginia and consisting of a series of one or more residential subdivisions known as “Fawn Lake”.

 

1.20.  “FLCA” means Fawn Lake Community Association, a Virginia non-stock corporation.

 

1.21.  “FLCA Board” means the governing Board of the FLCA.

 

1.22.  “FLCC” means Fawn Lake Country Club, a Virginia non-stock corporation.

 

1.23.  “FLCC Board” means the governing Board of the FLCC, which entity shall lease, operate and manage the Country Club subsequent to the Closing.

 

1.24.  “Golf Course” means the 18-hole Arnold Palmer designed golf course, the driving range, the practice facilities, cart paths and related Improvements located on the Real Property (as hereinafter defined).

 

1.25.  “Hazardous Substances” and/or “Hazardous Materials” means any substance, chemical, compound, product, solid, gas, liquid, waste, byproduct, pollutant, contaminant, or material which is hazardous or toxic, and includes, without limitation, (a) asbestos, polychlorinated biphenyls and petroleum (including crude oil or any fraction thereof) and (b) any material classified or regulated as “hazardous” or “toxic” pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amen dments and Reauthorization Act of 1986, 42 USC 9601 et seq., Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984, 42 USC 6901 et seq., Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 USC 1251 et seq., Clean Air Act of 1966, as amended, 42 USC 7401 et seq., Toxic Substances Control Act of 1976, 15 USC 2601 et seq., or the Hazardous Materials Transportation Act, 49 USC App. 1801 et seq.

 

1.26.  “Improvements” means all buildings, structures, fixtures and other improvements owned by Seller and located on, over and under the Real Property and used in the management or operation of the Country Club including, without limitation, the Clubhouse, the Golf Course, the golf pro shop, and the Maintenance Facility.

 

1.27.  “Intangible Property” shall mean that intangible property to be identified during the Investigation Period by the Parties and then listed on Exhibit C.

 

1.28.  “Investigation Period” shall have the meaning given to such term in Section 4.1 of this Agreement.

 

1.29.  “Liquor License” means the liquor license(s) held by Seller and currently in use at the Country Club allowing for the sale of alcoholic beverages.

 

1.30.  “Maintenance Facility” means the maintenance building, storage area and related facilities located on the Real Property, as depicted on Exhibit D, attached hereto.

 

1.31.  “Material Loss” means damage, loss or destruction to any portion of the Country Club Property, the loss of which is equal to or greater than Twenty-Five Thousand and 00/100ths Dollars ($25,000.00) (measured by the cost of repair or replacement) per occurrence or equal to or greater than One Hundred Thousand and 00/100ths Dollars ($100,000.00) (measured by the cost of repair or replacement) in the aggregate.

 

1.32.  “Member” means any person or entity holding a Membership in the Country Club as of the Closing Date.

 

1.33.  “Membership” means any membership or other right, license or privilege which authorizes a Member to utilize all or any portion of the Country Club.

 

1.34.  “Membership Agreement” means any contract, agreement or other written understanding entered into in connection with the offer, sale and/or issuance of a Membership in the Country Club and still in effect as of the Closing Date, including Membership Agreements which have expired, but that still include executory initiation fee refund obligations to be assumed by the Purchaser under Section 2.1, below.  The initiation fee refund obligations are set forth on Exhibit E-1, attached hereto.

 

1.35.  “Membership Deposits” mean all refundable membership deposits received by Seller and listed on Exhibit E, as supplemented at Closing.

 

1.36.  “Membership Fee Payable” means the outstanding initiation fee obligation of certain golf members listed on Exhibit E.

 

1.37.  “Non-Material Loss” means damage, loss or destruction to any portion of the Country Club Property, the loss of which is less than Twenty-Five Thousand and 00/100ths Dollars ($25,000.00) (measured by the cost of repair or replacement) per occurrence and less than One Hundred Thousand and 00/100ths Dollars ($100,000.00) (measured by the cost of repair or replacement) in the aggregate.

 

1.38.  “Notice” shall have the meaning given to such term in Section 17.1 of this Agreement.

 

1.39.  “Ordinary Course of Business” means any action taken by Seller that is consistent in nature and scope with the past practices of Seller taken in the ordinary course of the normal day-to-day operations of the Country Club during the twelve (12) month period preceding the Effective Date.

 

1.40.  “Permits” shall mean all permits, licenses, certificates (including, but not limited to, certificates of occupancy), written approvals, authorizations and orders obtained from any governmental authority (including, but not limited to zoning authorizations and/or Special Use Permits) for and relating to the Country Club Property or the business of owning, operating, maintaining and/or managing  the Country Club, which are assignable.

 

1.41.  “Personal Property” shall mean all equipment, machinery, tools, appliances, furnishing, furniture, fixtures, trade fixtures, goods held for resale, pro shop inventory, dining facility inventory including but not limited to food, beverages and linen, fertilizer and pesticide inventory and all other supplies maintained for application upon the Real Property, supplies, telephone and computer equipment and other items of tangible personal property located on the Real Property, and used primarily in connection with the business of owning, operating, maintaining and/or managing the Country Club and to be identified and agreed upon by th e Purchaser and Seller during the Investigation Period and to be listed on Exhibit F.

 

1.42.      “Phase 1 Report” means the report generated pursuant to a Phase 1 environmental study.

 

1.43.  “Purchaser’s Re-Certification” means a Purchaser’s Re-Certification of Representations and Warranties which updates the Purchaser’s representations, warranties and covenants contained herein, subject to any newly discovered facts or changes in circumstance which constitute material changes to the representations, warranties and covenants.

 

1.44.      “Real Property” means those certain tracts or parcels of real property, with Improvements thereon, consisting of approximately 185.2104 acres, part of Tax Map Number 18-A-22, located in Spotsylvania County, Virginia, and depicted on that certain plat titled “Plat of Subdivision Golf Course Parcel Fawn Lake Subdivision” prepared by Welford Engineering Associates, Inc., dated August, 2010, as last revised “Subdivision Plat” as shown on Exhibit A, togeth er with (a) all easements, rights-of-way and appurtenances relating to or pertaining to the Real Property; (b) all of Seller’s right, title and interest in and to all water wells, and all portions of streams, creeks, ponds, lakes or other bodies of water in, on or under the Real Property, including aeration equipment in such waters; and (c) all sewer, septic and waste disposal rights and interests applicable or appurtenant to and/or used in connection with the Real Property.

 

1.45.      “Seller’s Actual Knowledge” means the actual knowledge of Ralph DeRosa, who is a Senior Vice President of Seller, or if Ralph DeRosa no longer serves in such capacity, it means the actual knowledge of Seller’s President.

 

1.46.      “Seller’s Re-Certification” means a Seller’s Re-Certification of Representations and Warranties which updates the Seller’s representations, warranties, and covenants contained herein, subject to any newly discovered facts or changes in circumstance which constitute material changes to the representations, warranties, and covenants.

 

1.47.      “Title Insurer” means Lawyers Title Insurance Corporation, or its successor, the title insurance company providing title insurance on the Country Club Property for the benefit and at the sole expense of Purchaser.

2.1.  Purchase and Sale of Country Club Property.  As noted in the Preamble, this Agreement is for the purchase and sale of assets only, and except as expressly provided herein, Purchaser is not acquiring any of Seller’s debts, liabilities and/or obligations.  Subject to the terms and conditions set forth in this Agreement, Seller shall sell, convey, assign, transfer and deliver to Purchaser, and Purchaser shall purchase, acquire, and assume from Seller the Country Club Property free of any lien, encumbrance, liability or obligation of any kind, and however designated, other than the Permitted Exceptions, as defined herein, or except to the extent that Purchaser agrees explicitly herein to accept or assume a specified obligation.  Purchaser agrees to assume any Contracts listed on Exhibit B that are not terminable without penalty upon less than thirty (30) days’ notice.  Except for new contracts or contract extensions entered into in the Ordinary Course of Business that are terminable upon not more than thirty (30) days’ notice, after the Effective Date, Seller shall not enter into any new contracts, or into any contract extensions, for terms extending beyond the Closing Date, without first obtaining the concurrence, in writing, of the FLCC and the Purchaser.  Purchaser acknowledges that as of the Closing Date Purchaser shall assume, and agrees to discharge, the obligations of Seller with respect to the Membership Program, including any outstanding obligation of the Seller for the refund of Membership initiation fees set forth on Exhibit E-1, attached hereto.  Seller acknowledges that as of the Closing Date there will exist unpaid Membership initiation fees which shall be assigned to Purchaser at Closing, without recourse or warranty.

 

2.2.  “As Is, Where Is.”  Except as expressly provided herein, the Country Club Property shall be sold and conveyed “AS IS”, “WHERE IS” and title and possession shall be subject to the terms of this Agreement. Purchaser acknowledges that acreage and boundaries of the Real Property are approximate and will be determined at the time of final subdivision approval from the appropriate governmental authorities and recordation of the Subdivision Plat creating the Property as a legally separate parcel (“Plat Approval”).  The Seller, P urchaser and FLCC shall agree upon the Subdivision Plat during the Investigation Period.  Notwithstanding anything to the contrary herein, Purchaser shall be responsible for inspecting all systems, including all electrical, mechanical and plumbing systems and Seller shall have no liability with respect to the condition thereof.

 

ARTICLE 3 -- PURCHASE PRICE

 

3.1.  The purchase price for the Country Club Property (“Purchase Price”) shall be Two Million Five Hundred Thousand Dollars ($2,500,000.00) plus or minus any other proration amounts set forth in Section 13.2 of this Agreement.  The Purchase Price shall be paid on the Closing Date by the Purchaser to the Seller by wire transfer of immediately available funds in accordance with an approved settlement statement for the Closing, with the exception of the Holdback as defined in and to be disbursed in accordance with the terms and conditions of Section 13.3 of this Agreement.

 

ARTICLE 4 -- INVESTIGATION PERIOD; TITLE; VOLUNTARY TERMINATION

 

4.1.  Investigation Period.  During the period commencing on the Effective Date and terminating at 11:59 p.m. on a date that is twenty-one (21) days following the Effective Date,

 

 

Purchaser and/or the FLCC shall have access to the Country Club Property for the purpose of conducting and completing, at the sole cost and expense of Purchaser and/or the FLCC (the “Investigation Period”), such engineering, architectural, environmental, documentary review and other investigations that Purchaser and/or the FLCC, in their discretion, deem appropriate, of all matters pertaining to the Country Club Property and the Country Club and to the purchase thereof including, without limitation, the matters described in this Article 4.  Purchaser and the FLCC shall keep confidential the results of Purchaser’s and the FLCC’s investigation of the Country Club Property and the Country Club and any information discovered in connection therewith, and, without the prior written consent of Seller, may not disclose the same to any person or entity, other than Purchaser’s and/or the FLCC’s lender, attorneys and other professionals provided, that if Purchaser closes on the transaction contemplated hereby, Purchaser and the FLCC’s confidentiality obligations under this Agreement shall terminate at the Closing, except that neither Purchaser nor the FLCC shall disclose the results of any environmental reports to any third parties other than as required by law and as permitted above.

 

(a)  Physical and Geological Inspection.  During the Investigation Period, Purchaser and the FLCC shall have the right, at the sole cost and expenses of Purchaser and the FLCC, to make inspections (including tests, surveys and other studies) of the Country Club Property and of all matters relating thereto.  During the Investigation Period, Purchaser and the FLCC and their consultants, agents, contractors and subcontractors (collectively, “Purchaser’s Consultants”) shall have the right to enter upon the Country Club Property to make such inspections and test s as Purchaser and the FLCC may reasonably deem necessary and which may be accomplished without causing any alteration or damage to the Country Club Property.  Any invasive testing or testing that involves soil borings may only be conducted with the prior written consent of Seller.  Prior to conducting any inspections or tests Purchaser and the FLCC shall notify Seller of their intent to do so, such notice to be provided in writing at least three (3) Business Days prior to the conduct of any such inspection or test.  If any such inspection or test shall alter or damage any portion of the Country Club Property, Purchaser and the FLCC shall, upon the completion of such inspection or test, return such property to the condition that it was in prior thereto.  The foregoing shall not be construed as eliminating the requirement that Purchaser and the FLCC obtain Seller’s prior written consent to any inspections or tests that alter or damage any portion of the Country Cl ub Property.  In no event shall Purchaser, the FLCC or Purchaser’s Consultants conduct any invasive testing on the Country Club Property without first obtaining, in writing, the Seller’s approval.  Any Consultant retained by Purchaser or the FLCC for the conduct of inspections or testing shall carry such insurance, in form and amount, as is customarily carried by consultants performing similar activities.  Purchaser and the FLCC shall provide Seller with proof of such insurance coverage prior to the conduct of any inspections or tests.  Seller shall have the right to accompany Purchaser, the FLCC or Purchaser’s Consultants during any such inspection or test.  While conducting such inspections or tests, neither Purchaser, the FLCC nor Purchaser’s Consultants shall interfere with the golf and/or ongoing operations of the Country Club or the Country Club Property.  Purchaser and the FLCC shall indemnify and hold Seller harmless from and against any losses, liabilities, costs, or expenses (including reasonable attorney’s fees) arising out of Purchaser’s, the FLCC’s or Purchaser’s Consultants’ entry onto, or inspections or tests upon, the Country Club Property, but excluding any preexisting conditions and excluding any losses arising out of the mere discovery of the Property’s condition or solely resulting from the Seller’s, or its agent’s and employee’s, negligence or willful misconduct and such indemnity shall survive the termination of the

 

 

Agreement.  The indemnification hereunder shall not apply to loss or damage to the Country Club or the Country Club Property if Purchaser closes on the purchase and sale contemplated hereby.

 

Neither Purchaser nor the FLCC shall permit any liens or encumbrances to be placed against the Country Club Property in connection with any such inspections or testing and, if any such liens or encumbrances are placed on the Country Club Property, Purchaser and the FLCC shall immediately cause any such lien or encumbrance to be removed.  Purchaser and the FLCC shall indemnify Seller for any and all costs, losses or expenses incurred or suffered by Seller in connection with such liens or encumbrances, including costs of defending or removing same.  Seller agrees to reasonably cooperate with Purchaser and the FLCC, without cost to Seller, in connection with Purchaser’s and the FLCC’s investigative activities permitted hereunder.

 

(b)  Due Diligence Materials.  Within five (5) Business Days following the Effective Date, Seller shall make available for Purchaser’s inspection and copying, as applicable, all Due Diligence Materials in Seller’s possession to the extent that such materials were not previously provided to Purchaser.  During the Investigation Period, Purchaser shall have the right to conduct and complete an investigation of all matters pertaining to the Due Diligence Materials.  Seller agrees to reasonably cooperate with Purchaser, without cost to Seller, in connection with Purchaser’s investigation of the Due Diligenc e Materials and with all other matters pertaining to the Country Club Property and Purchaser’s acquisition of the Country Club Property.

 

(c)  Environmental Investigation.  Purchaser and/or the FLCC may retain, at Purchaser’s and/or FLCC’s election, expense and direction, a consultant to perform a Phase 1 environmental study and any such additional environmental investigations and/or inspections as Purchaser or the FLCC shall determine; provided, however, that any invasive testing, including testing involving soil borings may not be conducted without the prior written consent of Seller.  Seller shall, without cost to Seller, cooperate with Purchaser and/or the FLCC and with Purchaser’s Consultant, to the extent reasonably requested, in the conduct of such Phase 1 Environmental Study or other environmental investigations and/or inspections.

 

Purchaser and the FLCC shall provide Seller with copies of all test results, reports and other materials generated in connection with or as a result of any investigations or tests conducted under this Section 4.1.

 

4.2.  Title and Right of First Refusal.  The Country Club Property is to be sold free of encumbrances, other than the Permitted Exceptions, the obligations to be assumed by Purchaser hereunder and Seller’s right of first refusal as set forth in Section 7.1.  All real estate taxes, personal property taxes and other taxes or assessments shall be prorated as of the Closing Date or paid by Seller if due.  Title to the Real Property shall be in fee simple, good and marketable, and insurable at regular rates by the Title Insurer or another reputable title insurance company doing business in the Commonwealth of Virginia, subject, however, to the Permitted Exceptions (as defined below).  Purchaser shall, at its sole cost and expense, order its own title commitment (the “Title Commitment”) from the Title Insurer and, if desired, its own boundary survey relative to the Real Property.  In addition, Purchaser shall have the right to conduct, at its sole cost and expense, a UCC search in connection with the Personal Property and any portion of the Country

 

Club Property that may be subject to a security interest.  Purchaser shall notify Seller in writing, by no later than five (5) Calendar Days prior to the expiration of the Investigation Period, of any defects or exceptions with respect to title or survey or the Personal Property to which Purchaser objects (the “Title Objections”).  In addition, Purchaser shall be entitled on or before the Closing Date to identify as Title Objections any unacceptable title exceptions arising after the effective date of Purchaser’s title commitment or UCC search.  Also, with respect to any additional exception(s) created or recorded subsequent to the Title Commitment and/or recordation of the Subdivision Plat and/or Survey obtained by Purchaser or any update ther eto, such additional exception(s) shall be deemed to be a “Permitted Exception” hereunder unless Purchaser has objected to same, in writing, on or before the Closing Date.  Purchaser shall be deemed to have accepted all matters of title identified on the Title Commitment and UCC search other than those Title Objections timely delivered to Seller (the “Permitted Exceptions”).  Seller shall be responsible to pay-off and release, at or prior to Closing, all monetary liens on the Real Property and Personal Property (other than liens for taxes not yet due and payable), and Purchaser does not have to list them as Title Objections.

 

Seller shall elect, by written notice to Purchaser, given on or before the Closing Date, to either cure or not cure such Title Objections.  Failure to provide such notice shall be deemed an election by Seller not to cure all of such Title Objections. In the event that Seller elects to cure any Title Objections that cannot be cured by the Closing Date, Seller shall have the right to reasonably extend the Closing Date for the amount of time taken to cure such Title Objections, provided that Seller has commenced pursuing such a cure, but in no event later than October 26, 2010.  In the event Seller elects not to cure any and all the Title Objections, then Purchaser may, as its sole and exclusive remedy, terminate this Agreement.  If Purchaser does not terminate this Agreement prior to the expiration of the Investigation Period, then all such uncured Title Objections shall be deemed to be Permitted Exceptions.  It is agreed that the proceeds of sale may be used at Closing to discharge any monetary encumbrances against the Real Property and Personal Property.  It shall be the responsibility of the Seller to obtain any partial or full releases necessary to convey the Real Property and Personal Property free and clear of any such monetary liens.

 

After the Effective Date, Seller shall not place or cause to be placed any new encumbrances upon the Real Property or Personal Property without first obtaining the consent, in writing, of the Purchaser or the FLCC.  Purchaser shall have the option to terminate this Agreement at any time, including after the expiration of the Investigation Period, if any such new encumbrances are placed or caused to be placed upon the Real Property or Personal Property by Seller without Purchaser’s or the FLCC’s written consent and not cured on or before the Closing Date after receipt of notice of such encumbrances to Seller (unless such encumbrances may be cured by payment of a sum certain at Closing, and the Closing proceeds to Seller are, in fact, sufficient to pay such sum).

 

4.3.  Purchaser’s Right to Terminate and Return of Documents.  If, prior to the expiration of the Investigation Period, Purchaser determines that the acquisition of the Country Club Property is not suitable for any reason whatsoever, in the sole discretion of Purchaser, then Purchaser shall have the unqualified right to terminate this Agreement, provided that Purchaser shall give written notice thereof to the Seller prior to the expiration of the Investigation Period.  In the event Purchaser does not provide Seller with written notice of its termination of this

 

Agreement prior to the end of the Investigation Period, the Investigation Period shall lapse, and the Purchaser shall be obligated to proceed to Closing as provided herein.  Should Purchaser not terminate this Agreement during the Investigation Period, it shall continue to have access to the Country Club Property subject to the conditions of this Article 4.  If the Purchaser properly terminates this Agreement in accordance with this Section 4.3, the Parties shall have no further rights or obligations to or against each other under this Agreement whether in law or in equity, except as may be provided for herein (including Purchaser’s and the FLCC’s indemnification and confidentiality obligations under this Article 4).  Upon any such termination by Purchaser, Purchaser and the FLCC shall return to Seller an y documents previously furnished by Seller to Purchaser or the FLCC and any documents and reports generated in connection with its investigation of the Country Club Property, including but not limited to, any Due Diligence Materials and any report(s), including any Phase 1 Report or other environmental reports prepared by Purchaser’s Consultants.

 

ARTICLE 5 -- SPECIAL CONDITIONS PRECEDENT TO CLOSING

 

In addition to the obligations elsewhere imposed on the Parties as a condition precedent to Closing, including in Articles 6, 7, 8 and 9, the following additional requirements must be satisfied or waived by the Party for whose benefit the condition is imposed as a condition precedent to Closing:

 

5.1.  Bank Loan.  Purchaser and the FLCA shall have secured, on terms and conditions acceptable to Purchaser, bank financing in the amount of not less than Three Million Dollars ($3,000,000.00).  Purchaser and the FLCA shall diligently pursue such bank financing.

 

5.2.  Creation of the FLCC.  The FLCC governing entity shall have been established with full authorization to manage and operate the Country Club.

 

5.3.  Management and Operations Contract. A contractual arrangement shall be in place among the Seller, the FLCA, the FLCC and the Purchaser for the leasing, management and long-term operational control of the Country Club.

 

5.4.  Relinquishment of Claim.  The Seller as Declarant, on behalf of itself and any other person or entity, including any successors or assigns of Seller (a “Successor”), shall relinquish and waive its right to assert a claim against the FLCA for any and all prior or current contributions to the operations of the FLCA or to the budget of the FLCA as may be provided in the Declaration or otherwise pursuant to any other agreement or instrument, provided that the Seller, as Declarant, and any Successor shall have no obligation to make future contributions to the operations o f the Country Club, the FLCC or the Purchaser subsequent to Closing, whether to fund deficiencies or otherwise, as more specifically set forth in Section 6.10.  The Seller shall execute a waiver, in recordable form, that confirms and acknowledges that the Seller relinquishes any claims against the FLCA for reimbursement of any prior or current contributions to the operations of the FLCA.  In addition, Seller shall certify that there has been no assignment of its rights to any other person or entity with respect to any and all prior or current contributions to the operations of the FLCA or to the budget of the FLCA as may be provided in the Declaration or otherwise pursuant to any other agreement or instrument.  The terms and conditions of the

 

waiver shall be in a form reasonably acceptable to the Purchaser’s lender, the Purchaser, the FLCC, the FLCA and the Seller.

 

5.5.  Permits, Licenses and other Required Authorizations.  Purchaser and/or the FLCC shall have obtained from all required governmental authorities all Permits required to enable Purchaser and/or the FLCC to continue to operate the Country Club to the full extent of pre-Closing Date operations.  Purchaser and/or the FLCC shall be responsible for obtaining its own liquor license for the Country Club.  Seller’s liquor license will be terminated as of the Closing Date.

 

5.6.  Insurance.  Purchaser and/or the FLCC shall obtain, effective as of the Effective Date, and maintain such property, casualty, liability, workmen’s compensation and other forms of insurance typically carried by comparable country club operators.

 

5.7.  Easements; Access, Cart Paths and Use of Water.  Prior to the expiration of the Investigation Period, Seller, the FLCA, the FLCC and Purchaser shall agree on the terms and conditions of an agreement of easements and covenants (“Declaration of Easements”), which shall run with title to the Real Property and the remaining real property owned by Seller, providing for the easements across the applicable properties for access, cart paths, roads and parking and right of the Purchaser to withdraw water from Fawn Lake and other water sources (including wells) as and to the e xtent required for Country Club operations.  The Declaration of Easements shall include the maintenance and repair obligations and the proration of the costs and expenses associated with the withdrawal of the water, including but not limited to water meters, pumps, lines, and wells and the maintenance, repair and replacement of such improvements as necessary and shall also guaranty the right of the Country Club to withdraw water from Fawn Lake and other water sources as and to the extent required for Country Club operations (which may require a separate easement agreement from Seller), and establish usage rights in favor of and without cost to Seller in and to the Maintenance Facility (which also may require a separate agreement with Seller (i.e., a lease)

 

5.8.  Plat Approval.  Seller shall have obtained the consent and approval of all governmental authorities and agencies necessary prior to recordation of the Subdivision Plat and shall record the Subdivision Plat in the land records of Spotsylvania County, Virginia at or prior to the Closing.

 

5.9.  Fawn Lake Designation/Marketing Materials and Memberships.  Prior to the expiration of the Investigation Period, Seller, the FLCA, the FLCC and Purchaser shall agree on the terms and conditions of an agreement (“Post-Closing Agreement”) that provides for (i) the rights reserved by the Seller in Article 12; (ii) a limited non-assignable license and right to use the “Fawn Lake” name and logo in favor of Purchaser and/or the FLCC in connection with the normal operations of the Country Club; and (iii) an agreement to cooperate with sharing of designated marke ting materials of Seller.

 

5.10.    Purchaser’s Re-Certification; Seller’s Re-Certification.

 

(a)      If the Purchaser’s Re-certification discloses newly discovered facts or changes in circumstance which constitute material changes to the representations, warranties and

 

covenants, Seller may, in its discretion, elect to terminate this Agreement or to proceed to Closing, in which case, Seller shall close subject to such newly discovered facts or changes in circumstance.

 

(b)  If the Seller’s Re-certification discloses newly discovered facts or changes in circumstance which constitute material changes to the representations, warranties and covenants, Purchaser may, in its discretion, elect to terminate this Agreement or to proceed to Closing, in which case, Purchaser shall close subject to such newly discovered facts or changes in circumstance.

 

ARTICLE 6 -- SELLER’S RIGHTS AND OBLIGATIONS PRIOR TO CLOSING

 

Prior to the Closing Date, Seller shall have the following rights and covenants to discharge the following obligations:

 

6.1.  Operations.  During the period commencing on the Effective Date and terminating on the Closing Date or the earlier termination of this Agreement, Seller shall operate and manage the Country Club Property in the Ordinary Course of Business and maintain the Country Club Property in substantially the same condition and at substantially the same level of quality that existed as of the Effective Date.

 

6.2.  Environmental Compliance and Compliance with Governmental and other Requirements.  Until Closing, Seller shall comply with all Environmental Laws applicable to the Country Club Property and with all other requirements imposed by governmental authorities or by insurers of the Country Club Property.

 

6.3.  Contracts.  Seller shall continue to perform its obligations under existing Contracts.  Seller shall not enter into any new contracts, or renew, extend, amend, waive material rights under or terminate any contracts without the prior written approval of the FLCC and the Purchaser, which approval shall not be unreasonably withheld, conditioned or delayed.  Notwithstanding the foregoing, Seller may (i) enter into a new contract or a renewal or extension of an existing contract if such new contract or renewal or extension has been entered into in the Ordinary Course of Business and is terminable upon not more than thi rty (30) days’ notice and (ii) terminate any contract due to the default thereunder of the other party thereto, provided that Seller promptly provides written notice of such termination to Purchaser and the FLCC.  A termination of a contract by the other party thereto as permitted thereunder (other than upon an uncured default by Seller thereunder) shall not be deemed a violation of this Section 6.3.

 

6.4.  Memberships.  Seller shall have the right to sell Memberships in the Ordinary Course of Business provided, however, Seller may not, in connection with the sale of any such Membership, grant discounts from fees that ordinarily would apply (e.g. monthly dues, trail fees) which discounts would extend beyond the Closing Date.  In connection with any sale of a new Membership following the Effective Date, on the Closing Date the then applicable initiation fee for each category of Membership shall be paid to the Purchaser by the Seller and the relevant information required to be shown on Exhibit E shall be provided pursuant to a supplement thereof.

 

6.5.  Insurance.  Seller shall keep in full force and effect, through the Closing Date, all casualty, liability and other policies of insurance relating to the Country Club Property and/or the Country Club or the operation, maintenance or management thereof in effect as of the Effective Date under policies of insurance comparable to those in effect.

 

6.6.  Permits and Governmental Approvals.  Until the Closing Date, Seller shall maintain all Permits required for the continued operation of the Country Club Property and/or the Country Club as it is currently being operated, including any required food and beverage (e.g. liquor) license, shall pay all fees and charges necessary to keep those Permits current and in good standing, and shall not take any action or permit any action to be taken by those under its control which would invalidate, jeopardize, suspend, terminate or otherwise adversely affect the Permits and/or any of Seller’s rights thereunder.  At Closing, Seller shall receive a credit for prepayments of fees and charges applicable to Permits assigned to Purchaser.  Any prepaid items shall be disclosed to and approved by Purchaser and the FLCC prior to Closing.  Seller shall cooperate with Purchaser and/or the FLCC, at no cost to Seller, to effect the issuance of a new liquor license to Purchaser.

 

6.7.  Use of “Arnold Palmer Designation.”  Seller shall use reasonable commercial efforts to obtain the consent to the use of the Arnold Palmer Designation by the Purchaser following the Closing.  In the event Seller is not released from liability with respect to any agreement relating to the use of the Arnold Palmer Designation (the “APD Contract”), Purchaser and the FLCC hereby indemnify and agree to hold Seller harmless from any loss, liability, cost or expense arising out of the APD Contract or the use by Purchaser or the FLCC of the Arnold Palmer Designation from and after the Closing Date.

 

6.8.  Inventory.  Seller shall maintain the inventories of all food, beverages (including liquor), golf pro shop and golf course maintenance supplies (including but not limited to fertilizers and pesticides) at levels that are customary in the Ordinary Course of Business.

 

6.9.  Monetary Obligations.  Seller shall pay and satisfy in full any and all monetary obligations currently due and incurred in connection with the Country Club Property or the ownership, management and/or operation of the Country Club up to the Closing Date including, but not limited to the payment of all taxes, assessments and fees when due.  At Seller’s election, monetary obligations not yet due and payable, but arising as a result of operations prior to the Closing Date shall either be satisfied by Seller when due, or assumed by Purchaser and the subject of a credit to the Purchase Price in favor of Purchaser.