<PAGE>
 
                                                                   EXHIBIT 10.32

               AMENDED AND RESTATED GENERAL CONTINUING GUARANTY
               ------------------------------------------------
                       OF NATIONAL GOLF PROPERTIES, INC.
                       ---------------------------------

          AMENDED AND RESTATED GENERAL CONTINUING GUARANTY, dated as of July 1, 
          ------------------------------------------------
1996 (as amended from time to time, the "Guaranty"), of National Golf 
                                         --------
Properties, Inc., a Maryland corporation (the "Guarantor"), in favor of the 
                                               ---------
Persons listed on Schedule A and such other institutions and other Persons that 
either now or in the future are parties to any of the Note Agreements referred 
to below or holders of any of the Notes referred to below (the "Beneficiaries").
                                                                -------------

                                R E C I T A L S
                                - - - - - - - -

          WHEREAS, pursuant to several Note Purchase Agreements dated as of June
28, 1996 (the "Issuer Note Purchase Agreements") by and between the Issuer and 
               -------------------------------
each of the Beneficiaries listed on Schedule A hereto, the Beneficiaries have 
purchased the Issuer's 7.9% guarantied senior promissory notes due June 15, 2006
in the aggregate principal amount of $14,758,700 (together with all notes issued
in substitution or exchange therefor in accordance with the terms of the Issuer 
Note Purchase Agreements, the "Series A-1 Notes"), and the Beneficiaries have 
                               ----------------
severally agreed to purchase the Issuer's 8% guarantied senior promissory notes 
due ten years from the date of issuance thereof in the aggregate principal 
amount of $35,000,000 (together with all notes issued in substitution or 
exchange therefor in accordance with the terms of this Agreement, the "Series B 
                                                                       -------- 
Notes");
-----

          WHEREAS, the Guarantor, contemporaneously with the issuance of the 
Series A-1 Notes, executed and delivered a General Continuing Guaranty dated as 
of July 1, 1996 (the "Original Guaranty"), in favor of the Beneficiaries listed 
                      -----------------
on Schedule A thereto pursuant to which the Guarantor agreed to guaranty 
unconditionally any and all obligations of the Issuer to the Beneficiaries (as 
defined in the Original Guaranty) under the Issuer Note Purchase Agreements and 
the Series A-1 Notes and Series B Notes;

          WHEREAS, pursuant to several Note Purchase Agreements dated as of June
28, 1996 (the "Trust Note Purchase Agreements") by and between David G. Price, 
               ------------------------------
individually and as trustee of the Price Revocable Trust Amendment in Entirety 
dated February 9, 1987 (the "Trust"), and each of the Beneficiaries listed on 
                             -----
Schedule A hereto, the Beneficiaries have purchased the Trust's 7.9% senior 
promissory notes due June 15, 2006 in the aggregate principal amount of 
$13,794,200 (the "Trust Notes");
                  -----------

          WHEREAS, pursuant to several Note Purchase Agreements dated as of June
28, 1996 (the "Black Lake Note Purchase Agreements") by and between
               -----------------------------------
Black Lake/Penasquitos, a California general partnership ("Black Lake"), and
                                                           ----------
each of the Beneficiaries listed on Schedule A hereto, the Beneficiaries have
purchased Black Lake's 7.9% senior promissory notes due June 15, 2006 in the
aggregate principal amount of $11,447,100 (the "Black Lake Notes");
                                                ----------------

          WHEREAS, pursuant to Assumption Agreements dated as of July 1, 1996 
(the "Assumption Agreements") by and between the Issuer and each of the 
      --------------------- 
Beneficiaries listed on Schedule A hereto, the Issuer agreed to assume all of 
the liabilities, obligations, covenants, duties and indebtedness of the Trust 
and Black Lake to the Beneficiaries evidenced by the Trust Notes and Black Lake 
Notes, respectively, with the same effect as if such Notes had been executed and
delivered by the Issuer to the respective Beneficiaries (the Trust Notes and the
Black Lake Notes assumed by the Issuer being referred to herein as the Issuer's 
"Series A-2 Notes" and "Series A-3 Notes", respectively, and, together with
 ----------             ----------
<PAGE>
 
all notes issued in substitution or exchange therefor in accordance with the 
terms of the Agreements and together with the Series A-1 Notes, the "Series A 
                                                                     --------
Notes" and the Series A Notes together with the Series B Notes being referred to
-----
as the "Notes");
        -----
          
          WHEREAS, in consideration of the agreement by the Beneficiaries listed
on Schedule A hereto to purchase the Notes and for the purpose of including 
within the Obligations of the Guarantor the Series A-2 Notes and Series A-3 
Notes, the Guarantor has agreed, at the request of the Issuer, contemporaneously
with the execution and delivery of the Assumption Agreements, to execute and 
deliver this Guaranty and to guaranty unconditionally any and all obligations of
the Issuer to the Beneficiaries under the Note Documents and the Notes as 
provided herein.

                               A G R E E M E N T
                               - - - - - - - - -

          NOW, THEREFORE, for valuable consideration, the receipt and 
sufficiency of which are hereby acknowledged, the Guarantor agrees as follows:

                                   ARTICLE I

                        DEFINITIONS AND RELATED MATTERS

          SECTION 1.01   DEFINITIONS.  Terms with initial capital letters not 
                         -----------
otherwise defined herein have the respective meanings set forth in the 
Agreements (as defined below). In addition, the following terms with initial 
capital letters have the following meanings:

          "AGREEMENTS" shall mean those certain Restated Note Agreements dated 
           ----------
as of July 1, 1996 by and between the Issuer and the Beneficiaries listed on 
Schedule A hereto, amending and restating the Issuer Note Purchase Agreements 
and governing the Issuer's rights and obligations with respect to all of the 
Notes, including without limitation, the Series A-2 and A-3 Notes.

          "ASSUMPTION AGREEMENTS" is defined in the Recitals.
           ---------------------

          "BANKRUPTCY CODE" shall mean Title 11 of United States Code, as 
           ---------------
amended from time to time.

          "BENEFICIARIES" is defined in the Preamble.
           -------------

          "BLACK LAKE" is defined in the Recitals.
           ----------

          "BLACK LAKE NOTE PURCHASE AGREEMENTS" is defined in the Recitals.
           -----------------------------------

          "BLACK LAKE NOTES" is defined in the Recitals.
           ----------------

          "COLLATERAL" is defined in Section 2.02.
           ----------

          "DEFAULT" shall mean any default or other event which, with notice or 
           -------
the lapse of time or both, would constitute an Event of Default.

          "EVENTS OF DEFAULT" shall have the meaning specified in Section 5.01.
           -----------------

                                       2
<PAGE>
 
          "GUARANTOR" is defined in the Preamble.
           ---------

          "GUARANTY" is defined in the Preamble.
           --------

          "ISSUER" is defined in the Recitals.
           ------

          "ISSUER NOTE PURCHASE AGREEMENTS" is defined in the Recitals.
           -------------------------------

          "ISSUER SUBSIDIARIES" shall mean any Subsidiaries as defined in the 
           -------------------
Agreements.

          "MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" means (i) a 
           -----------------------      -----------------------
material adverse effect on or (ii) a material adverse change in, as the case may
be, any one or more of the following: (A) the business, operations, properties, 
financial condition or prospects of the Guarantor and its Subsidiaries taken as 
a whole, (B) the ability of the Guarantor to perform its obligations hereunder 
or (C) the validity or enforceability of this Guaranty.

          "NOTE DOCUMENTS" shall mean the Agreements together with the Notes and
           --------------
the Assumption Agreements.

          "NOTES" is defined in the Recitals.
           -----

          "OBLIGATIONS" is defined in Section 2.01.
           -----------

          "OBLIGOR" is defined in Section 2.02.
           -------

          "OFFICER'S CERTIFICATE" shall mean a certificate signed in the 
           ---------------------
Guarantor's name by any one of its Senior Officers.

          "ORIGINAL GUARANTY" is defined in the Recitals.
           -----------------

          "OTHER GUARANTOR" is defined in Section 2.02.
           ---------------

          "OTHER GUARANTY" is defined in Section 2.02.
           --------------

          "PARTNERSHIP UNITS" shall have the meaning set forth in the 
           -----------------
Partnership Agreement.

          "SENIOR OFFICERS" shall mean the Chairman (if an officer), President, 
           ---------------
Executive Vice President or Chief Financial Officer of the Guarantor or the most
senior officer of the Guarantor who reports to the independent committee of the 
Board of Directors under the Bylaws of the Guarantor.

          "SERIES A NOTES" is defined in the Recitals.
           --------------

          "SERIES A-1 NOTES" is defined in the Recitals.
           ----------------

          "SERIES A-2 NOTES" is defined in the Recitals.
           ----------------

          "SERIES A-3 NOTES" is defined in the Recitals.
           ----------------

          "SERIES B NOTES" is defined in the Recitals.
           --------------

                                       3
<PAGE>
 
          "SUBORDINATED DEBT" is defined in Section 2.08.
           -----------------

          "SUBSIDIARIES" shall mean the Issuer and any corporation or limited 
           ------------
liability company of which the Guarantor or the Issuer owns or controls, 
directly or indirectly, more than 50% of the Voting Stock or any partnership, 
joint venture or other entity in which the Guarantor or the Issuer owns or 
controls, directly or indirectly, more than a 50% equity interest and shall 
include, whether or not otherwise included in this definition, the Issuer and 
its Subsidiaries.

          "TRUST NOTE PURCHASE AGREEMENTS" is defined in the Recitals.
           ------------------------------

          "TRUST NOTES" is defined in the Recitals.
           -----------

          SECTION 1.02   RELATED MATTERS.
                         ---------------

          (a)  CONSTRUCTION.  Unless the context of this Guaranty clearly 
               ------------
requires otherwise, references to the plural include the singular, the singular 
includes the plural, the part includes the whole, "including" is not limiting, 
and "or" has the inclusive meaning represented by the phrase "and/or." The words
"hereof," "herein," "hereby," "hereunder" and similar terms in this Guaranty 
refer to this Guaranty as a whole (including the Preamble, the Recitals, the 
Schedules and the Exhibits) and not to any particular provision of this 
Guaranty. Article, section, subsection, exhibit, schedule, recital and preamble 
references in this Guaranty are to this Guaranty unless otherwise specified. 
References in this Guaranty to any agreement, other document or law "as amended"
or "as amended from time to time," or to amendments of any document or law, 
shall include any amendments, supplements, replacements, renewals, waivers or 
other modifications.

          (b)  ACCOUNTING TERMS AND DETERMINATIONS.  Unless otherwise specified 
               -----------------------------------
herein, all accounting terms used herein shall be interpreted, all accounting 
determinations hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared in accordance with GAAP.

          (c)  HEADINGS.  The Article and Section headings used in this Guaranty
               --------
are for convenience of reference only and shall not affect the construction 
hereof.

          (d)  SEVERABILITY.  If any provision of this Guaranty shall be held to
               ------------
be invalid, illegal or unenforceable under applicable law in any jurisdiction, 
such provision shall be ineffective only to the extent of such invalidity, 
illegality or unenforceability, which shall not affect any other provisions 
hereof or the validity, legality or enforceability of such provision in any 
other jurisdiction.

          (e)  INDEPENDENCE OF COVENANTS.  All covenants under this Guaranty 
               -------------------------
shall each be given independent effect so that if a particular action or 
condition is not permitted by any such covenant, the fact that it would be 
permitted by another covenant, by an exception thereto, or be otherwise within 
the limitations thereof, shall not avoid the occurrence of a Default or an Event
of Default if such action is taken or condition exists.

          (f)  EXHIBITS, ETC.  All of the appendices, exhibits and schedules 
               -------------
attached to this Guaranty shall be deemed incorporated herein by reference.

                                       4
<PAGE>
 
                                  ARTICLE II

                                   GUARANTY
                                   --------

          SECTION 2.01   GUARANTY.  The Guarantor unconditionally, absolutely 
                         --------
and irrevocably guaranties and promises to perform and pay to the order of the 
Beneficiaries, on demand, in lawful money of the United States of America, any 
and all Obligations of the Issuer from time to time owed to the Beneficiaries; 
provided that (a) no payment by the Guarantor shall be required hereunder with 
------------- 
respect to any of the Obligations unless and until the Issuer has failed to pay 
such Obligation as and when due (whether by acceleration, lapse of time or 
otherwise); (b) no demand, resort or other action against the Issuer, any other 
Person or any Collateral shall be required before payment by the Guarantor is 
required hereunder and (c) this Guaranty is a continuing guaranty of performance
and payment (and not merely of collection). The term "Obligations" is used 
                                                      -----------   
herein in its most comprehensive sense and includes any and all present and 
future obligations and liabilities of the Issuer of every type and description 
to any Beneficiary, or any of its successors or assigns, or any Person entitled 
to indemnification, under the Agreements or the Notes (including, without 
limitation, the Series A-2 and Series A-3 Notes assumed by the Issuer pursuant 
to the terms of the Assumption Agreements), whether relating to the performance 
of any covenant, undertaking or any other agreement, or whether for principal, 
interest, Makewhole Amount, reimbursement obligations, fees, expenses, 
indemnities or other amounts (including attorneys' fees and expenses), in each 
case whether due or not due, direct or indirect, joint or several, absolute or 
contingent, voluntary or involuntary, liquidated or unliquidated, determined or 
undetermined, now or hereafter existing, renewed or restructured, whether or not
from time to time decreased or extinguished and later increased, created or 
incurred, whether or not arising after the commencement of a proceeding under 
the Bankruptcy Code (including post-petition interest) and whether or not 
allowed or allowable as a claim in any such proceeding, and whether or not 
recovery of any such obligation or liability may be barred by a statute of 
limitations or such obligation or liability may otherwise be unenforceable. All 
Obligations shall be conclusively presumed to have been created in reliance on 
this Guaranty. All payments hereunder shall be made free and clear of any and 
all deductions, withholdings and setoffs, including withholdings on account of 
taxes.

          SECTION 2.02   CONTINUING AND IRREVOCABLE GUARANTY.  This is a
                         -----------------------------------
continuing guaranty of the Obligations and may not be revoked and shall not
otherwise terminate unless and until the Obligations have been indefeasibly paid
and performed in full. If notwithstanding the foregoing the Guarantor shall have
any unwaivable right under applicable law to terminate this Guaranty prior to
indefeasible payment in full of the Obligations, no such termination shall be
effective until noon the next Business Day after the Beneficiaries shall receive
written notice thereof, signed by the Guarantor. Any such termination shall not
affect this Guaranty in relation to (a) any Obligation that was incurred or
arose prior to the effective time of such notice, (b) any Obligation incurred or
arising after such effective time where such Obligation is incurred or arises
either pursuant to commitments existing at such effective time or incurred for
the purpose of protecting or enforcing rights against the Issuer, the Guarantor
or other guarantor of or any portion thereof (an "Other Guarantor"; each of the
                                                  ---------------
Issuer, the Guarantor, the Other Guarantors and each other Person directly or
indirectly liable on the Obligations, or any portion thereof, including, without
limitation, the Trust in respect of the Trust Notes and Black Lake in respect of
the Black Lake Notes, is referred to herein as an "Obligor") or any security
                                                   -------
("Collateral") given for the Obligations or any other guaranties of the
  ----------
Obligations or any portion thereof (an "Other"
                                        -----

                                       5
<PAGE>
 
Guaranty") or (c) any renewals, extensions, readvances, modifications or 
---------
rearrangements of any of the foregoing.

          SECTION 2.03 NATURE OF GUARANTY.  The liability of the Guarantor 
                       ------------------
hereunder is independent of and not in consideration of or contingent upon the 
liability of the Issuer or any other Obligor and a separate action or actions 
may be brought and prosecuted against the Guarantor, whether or not any action 
is brought or prosecuted against the Issuer or any other Obligor or whether the 
Issuer or any other Obligor is joined in any such action or actions. This 
Guaranty shall be construed as a continuing, absolute and unconditional guaranty
of performance and payment (and not merely of collection) without regard to:

          (a)  the legality, validity or enforceability against any Obligor of 
the Note Documents or the Notes, any of the Obligations, any Lien or Collateral 
or any Other Guaranty;

          (b)  any defense (other than payment), set-off or counterclaim that 
may at any time be available to the Issuer or any other Obligor against, and any
right of setoff at any time held by, any Beneficiary; or

          (c)  any other circumstance whatsoever (other than payment) (with or 
without notice to or knowledge of the Guarantor or any other Obligor), whether 
or not similar to any of the foregoing, that constitutes, or might be construed 
to constitute, an equitable or legal discharge of the Issuer or any other
Obligor, in bankruptcy or in any other instance.

          Any payment by any Obligor or other circumstance that operates to toll
any statute of limitations applicable to such Obligor shall also operate to toll
the stature of limitations applicable to the Guarantor. When making any demand 
hereunder (including by commencement or continuance of any legal proceeding), 
the Beneficiaries may, but shall be under no obligation to, make a similar 
demand on all or any of the other Obligors, and any failure by any Beneficiary 
to make any such demand shall not relieve the Guarantor of its obligations 
hereunder.

          SECTION 2.04 AUTHORIZATION.  The Guarantor, solely in its capacity as 
                       -------------
Guarantor hereunder and not as a partner, authorizes each Beneficiary, without 
notice to or further assent by the Guarantor, and without affecting the 
Guarantor's liability hereunder (regardless of whether any subrogation or 
similar right that the Guarantor may have or any other right or remedy of the 
Guarantor is extinguished or impaired), from time to time to:

          (a)  permit the Issuer to increase or create Obligations, or 
terminate, release, compromise, subordinate, extend, accelerate or otherwise 
change the amount or time, manner or place of payment of, or rescind any demand 
for payment or acceleration of, the Obligations or any part thereof (including 
increasing or decreasing the rate of interest thereon), or otherwise amend the 
terms and conditions of the Note Documents and the Notes or any provision 
thereof;

          (b)  take and hold Collateral from the Issuer or any other Person, 
perfect or refrain from perfecting a Lien on such Collateral, and exchange, 
enforce, subordinate, release (whether intentionally or unintentionally), or 
take or fail to take any other action in respect of, any such Collateral or Lien
or any part thereof;

                                       6



                 





<PAGE>
 
          (c)  exercise in such manner and order as it elects in its sole 
discretion, fail to exercise, waive, suspend, terminate or suffer expiration of,
any of the remedies or rights of such Beneficiary against the Issuer or any 
other Obligor in respect of any Obligations or any Collateral;

          (d)  release, add or settle with any Obligor in respect of this 
Guaranty, any Other Guaranty or the Obligations;

          (e)  accept partial payments on the Obligations and apply any and all 
payments or recoveries from any Obligor or collateral to such of the Obligations
as any Beneficiary may elect in its sole discretion, whether or not such 
Obligations are secured or guaranteed;

          (f)  refund at any time, at such Beneficiary's sole discretion, any 
payments or recoveries received by such Beneficiary in respect of any 
Obligations or Collateral; and

          (g)  otherwise deal with the Issuer, any other Obligor and any 
Collateral as such Beneficiary may elect in its sole discretion.

          SECTION 2.05 CERTAIN WAIVERS.  The Guarantor waives:
                       ---------------
             
          (a)  the right to require the Beneficiaries to proceed against the 
Issuer or any other Obligor, to proceed against or exhaust any Collateral or to 
pursue any other remedy in any Beneficiary's power whatsoever and the right to 
have the property of the Issuer or any other Obligor first applied to the 
discharge of the Obligations;

          (b)  all rights and benefits under applicable law purporting to reduce
a guarantor's obligations in proportion to the obligation of the principal or 
providing that the obligation of a surety or guarantor must neither be larger 
nor in other respects more burdensome than that of the principal;

          (c)  the benefit of any statute of limitations affecting the 
Obligations or the Guarantor's liability hereunder;

          (d)  any requirement of marshalling or any other principle of election
of remedies;

          (e)  any right to assert against any Beneficiary any defense (legal or
equitable), set-off, counterclaim and other right that the Guarantor may now or 
any time hereafter have against the Issuer or any other Obligor;

          (f)  presentment, demand for payment or performance (including 
diligence in making demands hereunder), notice of dishonor or nonperformance, 
protest, acceptance and notice of acceptance of this Guaranty, and all other 
notices of any kind, including (i) notice of the existence, creation or 
incurrence of new or additional Obligations, (ii) notice of any action taken or 
omitted by the Beneficiaries in reliance hereon, (iii) notice of any default by 
the Issuer or any other Obligor, (iv) notice that any portion of the Obligations
is due, and (iv) notice of any action against the Issuer or any other Obligor,
or any enforcement of other action with respect to any Collateral, or the
assertion of any right of any Beneficiary hereunder;

          (g)  all defenses that at any time may be available to the Guarantor 
by virtue of any valuation, stay, moratorium or other law now or hereafter in 
effect; and 

                                       7
<PAGE>
 
          (h)  without limiting the generality of the foregoing or any other 
provision hereof, all rights and benefits under California Civil Code Sections 
2810, 2819, 2839, 2845, 2848, 2849, 2850, 2899, and 3433 and comparable 
provisions of other applicable law.

          SECTION 2.06 SUBROGATION; CERTAIN AGREEMENTS.
                       -------------------------------

          (a)  The Guarantor waives any and all rights of subrogation, 
indemnity, contribution or reimbursement, and any and all benefits of and rights
to enforce any power, right or remedy that any Beneficiary may now or hereafter 
have in respect of the Obligations against the Issuer or any other Obligor, any 
and all benefits of and rights to participate in any Collateral, whether real or
personal property, now or hereafter held by any Beneficiary, and any and all 
other rights and claims (as defined in the Bankruptcy Code) the Guarantor may 
have against the Issuer or any other Obligor, under applicable law or otherwise,
at law or in equity, by reason of any payment hereunder, unless and until the
Obligations shall have been paid in full.

          (b)  The Guarantor assumes the responsibility for being and keeping 
itself informed of the financial condition of the Issuer and each other Obligor 
and of all other circumstances bearing upon the risk of nonpayment of the 
Obligations that diligent inquiry would reveal, agrees that the Beneficiaries 
shall have no duty to advise the Guarantor of information regarding such 
condition or any such circumstances and waives any defense that at any time may 
otherwise be available to Guarantor based on any failure by the Guarantor to be 
informed, or any failure by any Beneficiary to advise the Guarantor, of 
information regarding such condition or any such circumstances.

          SECTION 2.07 BANKRUPTCY NO DISCHARGE.
                       -----------------------

          (a)  Without limiting Section 2.03, this Guaranty shall not be 
discharged or otherwise affected by any bankruptcy, reorganization or similar 
proceeding commenced by or against the Issuer or any other Obligor, including 
(i) any discharge of, or bar or stay against collecting, all or any part of the 
Obligations in or as a result of any such proceeding, whether or not assented to
by any Beneficiary, (ii) any disallowance of all or any portion of any 
Beneficiary's claim for repayment of the Obligations, (iii) any failure by any 
Beneficiary to file or enforce a claim against the Issuer or any other Obligor
or its estate in any bankruptcy or reorganization case, (iv) any amendment,
modification, stay or cure of any Beneficiary's rights that may occur in any
such proceeding or (v) any borrowing or grant of a Lien under Section 364 of the
Bankruptcy Code. The Guarantor understands and acknowledges that by virtue of
this Guaranty, it has specifically assumed any and all risks of any such
proceeding with respect to the Issuer and each other Obligor.

          (b)  Any Event of Default under Section 8.1(f) or (g) of the
Agreements as to the Issuer, the Guarantor or any Restricted Subsidiary having,
individually or in the aggregate, assets with a book value of at least
$5,000,000 or annual revenues of at least $2,500,000 shall render all
Obligations automatically due and payable for purposes of this Guaranty.

          (c)  Notwithstanding anything to the contrary herein contained, this 
Guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time any payment, or any part thereof, of any or all of the Obligations 
is rescinded, invalidated, declared to be fraudulent or preferential or 
otherwise required to be restored or returned by any Beneficiary in connection 
with any bankruptcy, reorganization or similar proceeding involving the Issuer, 
any other Obligor or 

                                       8
<PAGE>
 
otherwise or if any Beneficiary elects to return any such payment or proceeds or
any part thereof in its sole discretion, all as though such payment had not been
made or such proceeds not been received. Without limiting the generality of the 
foregoing, if prior to any such rescission, invalidation, declaration, 
restoration or return, this Guaranty shall have been cancelled or surrendered, 
this Guaranty shall be reinstated in full force and effect, and such prior 
cancellation or surrender shall not diminish, discharge or otherwise affect the 
obligations of the Guarantor in respect of the amount of the affected payment or
application of proceeds.

          SECTION 2.08 SUBORDINATION
                       -------------

          (a)  The Guarantor hereby absolutely subordinates, both in right of 
payment and in time of payment, any and all present or future obligations and 
liabilities of the Issuer and each other Obligor to the Guarantor ("Subordinated
                                                                    ------------
Debt"), to the prior payment in full in cash of the Obligations, whether or not 
----
such Subordinated Debt constitutes or arises out of any subrogation, 
reimbursement, contribution, indemnity or similar right attributable to this 
Guaranty: provided that, as long as no Event of Default has occurred and is 
continuing (or would arise as a result of such payment), this provision shall 
not prevent payment of Subordinated Debt by the Issuer or any other Obligor not 
made in anticipation of an Event of Default. Upon the occurrence and during the 
continuation of an Event of Default, if, whether or not at any Beneficiary's 
request, the Guarantor shall receive, prior to payment in full in cash of all 
Obligations, payment of any sum from the Issuer or any other Obligor upon any 
Subordinated Debt, any such sum shall be received by the Guarantor as trustee 
for the Beneficiaries and shall forthwith be paid over to the Beneficiaries on 
account of the Obligations, without reducing or affecting in any manner the 
liability of the Guarantor under this Guaranty.

          (b)  The Guarantor shall file in any bankruptcy or reorganization or 
similar proceeding in which the filing of claims is required by applicable law, 
all claims that the Guarantor may have against the Issuer or other Obligor (or 
its nominee) relating to any Subordinated Debt. If the Guarantor does not file 
any such claim, the Beneficiaries (or their nominee) as attorney-in-fact for the
Guarantor are each hereby authorized to do so in the name of the Guarantor.

                                  ARTICLE III

                        REPRESENTATIONS AND WARRANTIES

          The Guarantor makes the following representations and warranties, as 
of the date hereof and as of the time of the applicable Closing, all of which 
shall survive until termination of this Guaranty pursuant to Section 2.02:

          SECTION 3.01 ORGANIZATION, POWERS, GOOD STANDING AND COMPLIANCE. The 
                       --------------------------------------------------
Guarantor is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, and has all requisite 
corporate power and authority and the legal right to own and operate its 
properties and to carry on its business as heretofore conducted and proposed to 
be conducted. The Guarantor has all requisite corporate power and authority to 
enter into this Guaranty and to carry out the transactions contemplated hereby. 
The Guarantor is duly qualified and in good standing as a foreign corporation 
and authorized to do business in each state where the nature of its business 
activities conducted or properties owned or leased requires it to be so 
qualified and where the failure to be so qualified would not have a Material 
Adverse Effect. Neither the Guarantor nor any of its Subsidiaries is in 
violation of any law, governmental rule or regulation or any Order of 

                                       9
<PAGE>
 
any court, arbitrator or other Governmental Body applicable to it, the 
consequences of which violation, either in any one case or in the aggregate, 
would reasonably be expected to have a Material Adverse Effect.

          SECTION 3.02   AUTHORIZATION, BINDING EFFECT, NO CONFLICT, ETC.  The 
                         -----------------------------------------------
execution, delivery and performance by the Guarantor of this Guaranty have been 
duly authorized by all necessary corporate action. This Guaranty has been duly 
executed and delivered by the Guarantor and is the legal, valid and binding 
obligation of the Guarantor, enforceable against it in accordance with its 
terms, except as enforcement may be limited by equitable principles and by 
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to 
creditors' rights generally. The execution, delivery and performance by the 
Guarantor of this Guaranty, and the consummation of the transactions 
contemplated hereby, do not and will not (a) violate any provision of the 
charter or bylaws of the Guarantor, (b) conflict with, result in a breach of or 
constitute (or, with the giving of notice or lapse of time, or both, would 
constitute) a default under, or require the approval or consent (not otherwise 
obtained) of any Person pursuant to, any indenture, mortgage, bank loan, credit 
agreement or other agreement or instrument of the Guarantor or any of its 
Subsidiaries that is material to the Guarantor and its Subsidiaries taken as a 
whole, or violate or provision of applicable law binding on the Guarantor, (c) 
violate any Order of any Governmental Body having jurisdiction over the 
Guarantor or any of its Subsidiaries or (d) result in the creation or imposition
of any Lien of any nature whatsoever upon any of the Guarantor's assets. Subject
to the accuracy of the representations and warranties of the Beneficiaries 
contained in Sections 1.5 to 1.8 of the Agreements and the performance by the 
Beneficiaries of the agreements contained in Section 1.9 of the Agreements, no 
consent, approval or authorization of, or registration, filing or declaration 
with, any Governmental Body is required for or in connection with the execution,
delivery and performance by the Guarantor of this Guaranty, or the consummation 
of transactions contemplated hereby, or to ensure the legality, validity or 
enforceability hereof.

          SECTION 3.03   FINANCIAL CONDITION.  The financial statements of the 
                         -------------------
Guarantor included in the Memorandum present fairly the financial position of 
the Guarantor and its Subsidiaries as at the dates indicated and the results of 
their operations and cash flow, for the periods specified; except as otherwise 
stated in the Memorandum, such financial statements have been prepared in 
conformity with GAAP applied on a consistent basis. The Guarantor has no 
material Contingent Obligations, liabilities for taxes or long-term leases, 
unusual forward or long-term commitments or unrealized or unanticipated losses 
from any unfavorable commitments that are not reflected in the foregoing 
financial statements or in the notes thereto. The pro forma financial statements
included in the Memorandum comply in all material respects with the applicable 
requirements of Rule 11-02 of Regulation S-X promulgated by the Commission and 
the pro forma adjustments have been properly applied to the historical amounts 
in the compilation of such statements. Except as disclosed in the Disclosure 
Documents or as expressly described on Schedule 3.03, since December 31, 1995 
there has been no Material Adverse Change.

          SECTION 3.04   DISCLOSURE.  The Disclosure Documents fairly describe, 
                         ----------
in all material respects, the general nature of the business and principal 
properties of the Guarantor and its Subsidiaries. There is no fact known to the 
Guarantor that could reasonably be expected to have a Material Adverse Effect 
that has not been set forth herein or in the Disclosure Documents or in the 
other documents, certificates and other writings delivered to the Beneficiaries 
by or on behalf of the Guarantor or the Issuer specifically for use in 
connection with the transactions contemplated hereby. Except as disclosed in 
Schedule 3.04, this Guaranty, the Disclosure Documents, the documents,

                                      10
<PAGE>
 
certificates or other writings delivered to the Beneficiaries by or on behalf of
the Guarantor or the Issuer in connection with the transactions contemplated 
hereby and the financial statements described in Section 3.03, taken as a whole,
do not contain any untrue statement of a material fact or omit to state a 
material fact necessary to make the statements contained therein not misleading 
in light of the circumstances under which they were made. Any projections 
contained in the Disclosure Documents were based on assumptions the Guarantor 
believes to be reasonable and were calculated or arrived at, as the case may be,
in a manner the Guarantor believes to be reasonable.

          SECTION 3.05   LITIGATION, ETC.  Except as disclosed on Schedule 3.05,
                         ---------------
there are no actions, suits or proceedings pending or, to the knowledge of the 
Guarantor, threatened against or affecting the Guarantor, the Issuer, any 
Subsidiary or any of their respective properties before any Governmental Body 
(a) in which there is a reasonable possibility of an adverse determination that 
could have a Material Adverse Effect or (b) that in any manner draws into 
question the legality, validity or enforceability of this Guaranty. The 
Guarantor is not in default under any applicable law or indenture, mortgage, 
bank loan, credit agreement or other agreement or instrument to which the 
Guarantor is a party or by which its properties are bound, except where such 
violation or default would not have a Material Adverse Effect.

          SECTION 3.06   TAXES.  The Guarantor has properly prepared and timely 
                         -----
filed all United States Federal income tax returns and all other tax returns 
required to be filed by it and has paid all taxes shown to be due on the returns
so filed as well as all other taxes, assessments and governmental charges that 
have become due, except such taxes, assessments or charges, if any, as are being
contested in good faith and as to which adequate reserves have been established 
in accordance with GAAP.

          SECTION 3.07   TITLE TO PROPERTY: LIMITED PARTNERSHIP.  The Guarantor 
                         --------------------------------------
has good title to, or valid and subsisting leasehold interests in, all of the 
property, whether real or personal, reflected in its financial statements as 
being owned or leased by it and none of such property is subject to any Liens, 
except for Liens described on Schedule 3.07. The Guarantor is the sole general 
partner of the Issuer. As of the date of this Guaranty 19,285,460 Partnership 
Units are issued and outstanding and 55% of such Partnership Units are owned by 
the Guarantor. The Partnership Agreement has been duly and validly authorized, 
executed and delivered by the parties thereto and is a valid and binding 
agreement, enforceable in accordance with its terms.

          SECTION 3.08   GOLF COURSE PROPERTIES.  At least ninety percent of all
                         ----------------------
Golf Courses owned, in whole or in part, by the Guarantor and its Subsidiaries 
are owned by the Issuer and the Restricted Subsidiaries. For the purposes of 
this Section 3.08, the percentage of Golf Courses owned by the Issuer and the 
Restricted Subsidiaries shall be calculated by dividing the total number of golf
course holes owned, in whole or in part, by the Issuer and the Restricted 
Subsidiaries by the total number of golf course holes owned, in whole or in 
part, by the Guarantor and its Subsidiaries and then multiplying the quotient by
100.

          SECTION 3.09   NO INVESTMENT COMPANY.  Neither the Guarantor nor the 
                         ---------------------
Issuer is an "investment company" or, to the best of their knowledge, an entity 
"controlled" by an "investment company" as such terms are defined in the 
Investment Company Act of 1940, as amended.

          SECTION 3.10   REIT STATUS.  The Guarantor is organized as a real 
                         -----------
estate investment trust under the Code and its ownership and method of operation
enables it to meet the requirements for taxation as a real estate investment 
trust under the Code.

                                      11
<PAGE>
 
          SECTION 3.11   INTERNAL ACCOUNTING CONTROLS.  The Guarantor and its 
                         ----------------------------
Subsidiaries maintain a system of internal accounting controls sufficient to 
provide reasonable assurance that (i) transactions are executed in accordance 
with management's general or specific authorizations; (ii) transactions are 
recorded as necessary to permit preparation of financial statements in 
conformity with GAAP and to maintain asset accountability; and (iii) the 
recorded accountability for assets is compared with the existing assets at 
reasonable intervals and appropriate action is taken with respect to any 
differences.

          SECTION 3.12   FINANCIAL BENEFIT: REVIEW OF DOCUMENTS.  The Guarantor 
                         --------------------------------------
hereby acknowledges and warrants it has derived or expects to derive a financial
advantage from each purchase of a Note or other extension of credit or 
relinquishment of legal rights, made or granted or to be made or granted by the 
Beneficiaries in connection with the Obligations. The Guarantor hereby 
acknowledges that it has copies of and is fully familiar with the Note Documents
and the Notes.

                                  ARTICLE IV

                                   COVENANTS
                                   ---------

          The Guarantor covenants that it shall perform each and all of the 
following until termination of this Guaranty pursuant to Section 2.02:

          SECTION 4.01   CORPORATE EXISTENCE, PROPERTIES, ETC.  The Guarantor 
                         ------------------------------------
will:

          (a)  do or cause to be done all things necessary to preserve and keep 
in full force and effect its corporate existence (except as otherwise permitted 
by Section 4.05) and its licenses, permits, rights (charter and statutory) and 
franchises, except that such licenses, permits, rights and franchises may be 
abandoned, modified, or terminated if in the good faith judgment of the 
Guarantor such abandonment, modification or termination is in the best interest 
of the Guarantor and would not, individually or in the aggregate, be 
disadvantageous to the Issuer, the Restricted Subsidiaries or the Beneficiaries;

          (b)  file all tax returns required to be filed in any jurisdiction;

          (c)  pay and discharge or cause to be paid and discharged (i) all 
taxes, assessments and governmental charges or levies imposed upon it or upon 
its income or profits or upon any of its property (real, personal or mixed), or 
upon any part thereof, or upon any of its assets or franchises when due, and 
(ii) all lawful claims of landlords, carriers, warehousemen, mechanics, 
materialmen and other similar Persons for labor, materials, supplies and rentals
which, if unpaid, might by law become a Lien upon any of its property; provided,
however, that the failure of the Guarantor to pay any such tax, assessment, 
charge, levy or claim shall not constitute a default hereunder if and for so 
long as the amount, applicability or validity thereof shall concurrently be 
contested in good faith by appropriate and timely proceedings diligently 
conducted, and if such reserve or other appropriate provision, if any, as shall 
be required by GAAP shall have been made therefor;

          (d)  implement and enforce reasonable requirements for lessees of all 
properties used or useful in the business of the Guarantor and its Subsidiaries 
to maintain and keep, or cause to be maintained and kept, in good repair, 
working order, appearance and condition all properties used or useful in the 
business of the Guarantor,

                                      12
<PAGE>
 
and from time to time, with reasonable promptness make or cause to be made all 
necessary or appropriate repairs, renewals, replacements and improvements 
thereof;

          (e)  implement and enforce reasonable requirements for lessees of all 
properties used or useful in the business of the Guarantor and its Subsidiaries 
to maintain or cause to be maintained with financially sound and reputable 
insurers, authorized to do insurance business in the State in which such 
property or business is located, insurance (including deductibles) in respect of
its properties and businesses against loss or damage of the kind customarily 
insured and of such type and in such amounts as are customarily maintained under
similar circumstances by prudent business entities of established reputation 
engaged in the same or similar business, including insurance described in 
Section 6.14(f) of the Agreements);

          (f)  comply in all material respects with all applicable lawful 
statutes, regulations and Orders of, and all applicable lawful restrictions 
imposed by, any Governmental Body, or by any trade or professional organization 
or other industry regulatory body in respect of the conduct of its business and 
the ownership of its properties (including, without limitation, applicable 
statutes, regulations and orders relating to equal employment opportunities), 
except where the failure to so comply, individually or in the aggregate, would 
not have a Material Adverse Effect;

          (g)  implement and enforce reasonable requirements to cause each of 
the real properties of the Guarantor and its Subsidiaries, whether now or 
hereafter owned, leased or operated, to be operated in compliance in all 
material respects with all Environmental Laws;

          (h)  continue to be the sole general partner of the Issuer; and

          (i)  maintain the validity of all patents, trademarks, service marks, 
trade names, copyrights and the like necessary, individually or in the 
aggregate, in any material respect for the conduct of its business as now 
conducted and as proposed to be conducted.

          SECTION 4.02   CHANGES TO ARTICLES OF INCORPORATION.  The Guarantor 
                         ------------------------------------
shall not amend or otherwise change any provision of its Articles of 
Incorporation relating to restrictions on ownership and transfer if such changes
could impair the tax status of the Guarantor.

          SECTION 4.03   FINANCIAL STATEMENTS: INFORMATION.  The Guarantor will 
                         ---------------------------------
furnish to each of the Beneficiaries, so long as it or its nominee shall be 
obligated to purchase or shall hold any of the Notes:

          (a)  as soon as practicable and in any event within 45 days after the 
end of each of the first three quarterly fiscal periods in each fiscal year of 
the Guarantor, the unaudited consolidated balance sheet of the Guarantor and its
Subsidiaries, and the unaudited consolidating balance sheet of the Guarantor, 
the Issuer and each Issuer Subsidiary, as of the end of such quarterly period 
and the related unaudited consolidated statements of income, retained earnings 
and cash flows of the Guarantor and its Subsidiaries, and the related unaudited 
consolidating statement of income of the Guarantor, the Issuer and each Issuer 
Subsidiary for such quarterly period and (in the case of the second and third 
such quarterly periods) for the portion of the fiscal year ended with the last 
day of such quarterly period, setting forth in each case in comparative form the
respective figures for the corresponding periods of the previous fiscal year, 
all in reasonable detail and certified as complete and correct in all

                                      13
<PAGE>
 
material respects in conformity with GAAP (except in respect of consolidating 
statements and footnotes), subject to changes resulting from year-end audit 
adjustments, by the principal financial officer of the Guarantor;

          (b)  as soon as practicable and in any event within 90 days after the 
end of each fiscal year of the Guarantor, the consolidated balance sheet of the 
Guarantor and its Subsidiaries, and the unaudited consolidating balance sheet of
the Guarantor, the Issuer and each Issuer Subsidiary, as of the end of such 
fiscal year and the related consolidated statements of income, retained earnings
and cash flows of the Guarantor and its Subsidiaries, and the related unaudited 
consolidating statement of income of the Guarantor, the Issuer and each Issuer 
Subsidiary, for such fiscal year, setting forth in each case in comparative form
the respective figures for the previous fiscal year, all in reasonable detail 
and (i) in the case of such consolidated statements, accompanied by a report 
thereon of Coopers & Lybrand L.L.P. or other independent certified public 
accountants of recognized national standing selected by the Guarantor, which 
report shall, unless a waiver of the provisions of this Section 4.03(b) has been
obtained pursuant to Section 6.2, be made without qualification as to or by 
reason of (x) changes in accounting principles and methods (other than changes 
therein in which such accountants express their concurrence), (y) the 
unavailability of sufficient competent evidential matter on which to base an 
audit or the inadequacy of accounting records or (z) restrictions on the scope 
of the audit conducted and shall comply with generally accepted auditing 
standards at the time in effect and shall state that such financial statements 
present fairly the financial position of the companies being reported upon as at
the dates indicated and the results of their operations and cash flows for the 
periods indicated and have been prepared in accordance with GAAP consistently 
applied (except for changes in application in which such accountants concur) on 
a basis consistent with prior years, and that the examination of such 
accountants has been made in accordance with generally accepted auditing 
standards, and accordingly included such tests of pertinent accounting records 
and such other auditing procedures as were considered necessary in the 
circumstances, and (ii) in the case of such consolidating balance sheets and 
statements of income of the Guarantor, the Issuer and each Issuer Subsidiary, 
certified as complete and correct in all material respects in conformity with 
GAAP by the principal financial officer of the Guarantor;

          (c)  concurrently with each delivery of financial statements pursuant 
to clause (a) or (b) of this Section 4.03, an Officer's Certificate 
substantially in the form of Exhibit A stating that such officer has reviewed 
the terms of this Guaranty, the Agreements and the Notes and has made, or caused
to be made under such officer's supervision, a review in reasonable detail of 
the transactions and conditions of the Guarantor and the Subsidiaries during the
accounting period covered by such financial statements, and that such review has
not disclosed the existence during, or at the end of such accounting period, and
that such officer does not have knowledge of the existence as at the date of 
such Officer's Certificate, of any condition or event which constitutes a 
Default or an Event of Default, or, if any such condition or event existed or 
exists, specifying the nature and period of existence thereof and what action 
the Guarantor has taken or is taking or proposes to take with respect thereto;

          (d)  together with each delivery of annual financial statements 
pursuant to clause (b) of this Section 4.03, a written statement of the 
accountants giving the report thereon:

               (i)    stating that they have read the Officer's Certificate 
delivered in connection with the annual financial statements pursuant to clause 
(c) of this Section 4.03 for such fiscal year and the Officer's Certificate 
delivered in

                                      14
<PAGE>
 
connection with the annual financial statements pursuant to clause (c) of 
Section 4 of the Agreements for such fiscal year and based upon their annual 
audit examination of the financial statements delivered pursuant to clause (b) 
of this Section nothing has come to their attention which causes them to believe
that the matters set forth in such written statement pursuant to subclauses 
(ii), (iii) and (iv) of such clause (c) of Section 4 of the Agreements in 
connection with such annual financial statements have not been properly stated 
in accordance with the terms of this Guaranty or the Agreements, and

               (ii)   stating that in making the examination necessary for their
report on such financial statements they obtained no knowledge of the existence 
of any condition or event which constitutes a Default or an Event of Default or,
if such accountants shall have obtained knowledge of any such Default or Event 
of Default, specifying all such Defaults and Events of Defaults and the nature 
and status thereof;

          (e)  promptly upon their becoming available (and in any event within 
ten Business Days thereafter), copies of (i) all financial statements, reports, 
notices, proxy statements and other information sent or made available generally
by the Guarantor to any class of its security holders, (ii) all regular and 
periodic reports (including reports on Form 8-K) and any registration statements
(other than on Form S-8 or a similar form) and prospectuses filed by the 
Guarantor or any of its Subsidiaries with any securities exchange or with the 
Commission and (iii) all press releases and other statements made available 
generally by the Guarantor to the public concerning material developments in the
business of the Guarantor or its Subsidiaries;

          (f)  promptly upon receipt thereof (and in any event within five 
Business Days thereafter), copies of all management letters or other reports 
submitted to the Guarantor by independent public accountants in connection with 
any annual, interim or special audit of the books of the Guarantor or its 
Subsidiaries made by such accountants;

          (g)  promptly upon (and in any event within three Business Days 
thereafter) any Senior Officer of the Guarantor obtaining knowledge of any 
condition or event which constitutes a Default or an Event of Default, or 
becoming aware that the holder of any Note has given any notice or taken any 
other action with respect to a claimed Default or Event of Default an Officer's 
Certificate specifying the nature and period of existence thereof and what 
action the Guarantor or the Issuer has taken or is taking or proposes to take 
with respect thereto;

          (h)  promptly, and in any event within 30 days of receipt thereof, 
copies of any notice to the Guarantor from any Federal or state Governmental 
Body relating to any Order, ruling, statute or other law or regulation that 
could reasonably be expected to have a Material Adverse Effect; and

          (i)  promptly upon request therefor (and in any event within five 
Business Days thereafter), such other information as to the business, 
operations, properties, financial condition or prospects of the Guarantor, the 
Issuer or any Subsidiary as may from time to time be reasonably requested.

          SECTION 4.04   INSPECTION.  The Guarantor shall permit, subject to 
                         ----------
confidentiality provisions comparable to the provisions of Section 5.2 of the 
Agreements, the representatives of each holder of Notes that is an institutional
investor:

          (a)  No Default - If no Default or Event of Default then exists, at 
               ----------
the expense of such holder and upon reasonable prior notice to the Guarantor, to
visit the

                                      15
<PAGE>
 
principal executive office of the Guarantor, to discuss the affairs, finances 
and accounts of the Guarantor, the Issuer and any Subsidiaries with the 
Guarantor's officers, and (with the consent of the Guarantor, which consent will
not be unreasonably withheld) its independent public accountants, and (with the 
consent of the Guarantor, which consent will not be unreasonably withheld) to 
visit the other offices and properties of the Guarantor, the Issuer and each 
Subsidiary, all at such reasonable times and as often as may be reasonably 
requested in writing; and

          (b)    Default -- if a Default or Event of Default then exists, at the
                 -------
expense of the Guarantor to visit and inspect any of the offices or properties 
of the Guarantor, the Issuer or any Subsidiary, to examine all their respective 
books of account, records, reports and other papers, to make copies and extracts
therefrom, and to discuss their respective affairs, finances and accounts with 
their respective officers and independent public accountants (and by this 
provision the Guarantor authorizes said accountants to discuss the affairs, 
finances and accounts of the Guarantor, the Issuer and its Subsidiaries), all
at such times and as often as may be requested.

          SECTION 4.05  CONSOLIDATION, MERGER, SALE OF ASSETS, ETC. The 
                        ------------------------------------------
Guarantor will not voluntarily liquidate or dissolve, or (whether in a single
transaction or a series of transactions) consolidate or merge with any other
Person, or permit any other Person to consolidate or merge with it, or sell,
lease, transfer or otherwise dispose of all or substantially all of its
properties or assets (whether now owned or hereafter acquired) to any other
Person, except that (as long as the successor formed by such consolidation or
the survivor of such merger or the Person that acquires such assets is an entity
organized as a real estate investment trust, a partnership or a limited
liability company under the Code and whose ownership and method of operation
enables it to meet the requirements for taxation as a real estate investment
trust or a partnership under the Code) the Guarantor may consolidate with or
merge into, or sell its assets as an entirety or substantially as an entirety
to, any other Person if the successor formed by such consolidation or the
survivor of such merger or the Person that acquires such assets is a solvent
corporation, partnership or limited liability company which shall be organized
under the laws of any state of the United States of America and, if the
Guarantor is not such corporation, partnership or limited liability company (i)
such corporation, partnership or limited liability company shall have executed
and delivered to each Beneficiary its assumption of the due and punctual payment
and performance of this Guaranty and shall have caused to be delivered to each
Beneficiary a favorable opinion of Latham & Watkins or other counsel, such
opinion and counsel to be reasonably satisfactory to the holders of at least 66-
2/3% in unpaid principal amount of the Notes then outstanding, to the effect
that all agreements and instruments effecting such assumption are enforceable in
accordance with their terms (subject to customary exceptions) and comply with
the terms hereof; provided, however, that at the time of and immediately after
                  -------   -------
giving effect to any such merger, consolidation, sale, lease or other
disposition no Event of Default or Default shall have occurred and be
continuing. No sale or other disposition permitted by this Section 4.05 shall in
any event release the Guarantor or any successor corporation, partnership or
limited liability company that shall theretofore have become such in the manner
prescribed in this Section 4.05 from any of its obligations and liabilities
under this Guaranty, except that a sale of all assets shall release the
Guarantor or any successor corporation, partnership or limited liability company
that shall theretofore have become such in the manner prescribed in this Section
4.05 from all of its obligations under this Guaranty.

          SECTION 4.06 OWNERSHIP OF GOLF COURSE PROPERTIES. The Guarantor shall 
                       -----------------------------------
cause at least ninety percent of all Golf Courses owned, in whole or in part, by

                                      16

<PAGE>
 
the Guarantor and its Subsidiaries at any time to be owned by the Issuer and the
Restricted Subsidiaries. For the purposes of this Section 4.06 the percentage of
Golf Course owned by the Issuer and the Restricted Subsidiaries shall be 
calculated using the same methodology set forth in Section 3.08 hereof.

                                   ARTICLE V

                               EVENTS OF DEFAULT
                               -----------------

          5.01   EVENTS OF DEFAULT. If any of the following conditions or events
                 -----------------
shall occur (herein called "Events of Default"), then as long as such condition 
                            -----------------
or event is continuing there shall be an outstanding Event of Default for 
purposes of this Guaranty and the Agreement:

          (a)    there shall occur any Event of Default (as defined in the 
Agreements); or

          (b)    default shall be made in the due and punctual payment of any 
amounts due and payable hereunder and such default shall have continued for a 
period of five days; or

          (c)    default shall be made in the performance or observance of any 
covenant, agreement or condition contained in Section 4.10(a)(insofar as it 
applies to corporate existence), 4.01(h), 4.02, 4.03(g) or 4.05; or

          (d)    default shall be made in the performance or observance of any 
other covenant, agreement or condition contained in this Guaranty and such 
default shall have continued for a period of 30 days after any Senior Officer of
the Guarantor shall have first obtained knowledge of such default (through 
notice or otherwise); or 

          (e)    (i) default shall be made in the payment of any part of the 
principal of, the premium (if any) or the interest on, or any other payment of 
money due in respect of, any Debt of the Guarantor for money borrowed in an 
aggregate principal amount of at least $15,000,000 (other than the Guaranty), 
beyond any period of grace provided with respect thereto, or (ii) default shall 
be made in the performance or observance of any other agreement, term or 
condition contained in any document or documents evidencing or securing Debt, or
in any agreement under which Debt was issued or created, in each case, if the 
effect of any one or more such defaults is to cause the holders of Debt (or a 
trustee on behalf of such holders) to cause any payment or payments in respect
of such Debt aggregating not less than $15,000,000 (other than the Guaranty) to
become due prior to the scheduled due date or dates thereof or (iii) as a
consequence of the occurrence or continuation of any event or condition (other
than the passage of time or the right of the holder or holders of any Debt to
convert such Debt into equity interests), (x) the Guarantor or any Subsidiary
has become obligated to purchase Debt (other than the Guaranty) before its
regular maturity or before its regularly scheduled dates of payment in an
aggregate outstanding principal amount of at least $15,000,000 or (y) one or
more Persons require the Guarantor or any Subsidiary so to purchase any such
Debt in an aggregate principal amount of at least $15,000,000; or

          (f)    any representation or warranty made by or on behalf of the 
Guarantor or by an officer of the Guarantor in this Guaranty or in any 
certificate or other instrument delivered hereunder or pursuant hereto or in 
connection with any 

                                      17
<PAGE>
 
provision hereof shall prove to be false or incorrect or breached in any
material respect on the date as of which made; or

          (g)  the Guarantor shall not be organized as a real estate investment
trust under the Code or meet the requirements for taxation as a real estate
investment trust under the Code.

                                  ARTICLE VI

                                 MISCELLANEOUS
                                 -------------

          SECTION 6.01 EXPENSES. The Guarantor shall pay to the Beneficiaries
                       --------
any and all costs and expenses (including reasonable attorneys' fees and
expenses), that any Beneficiary may incur after an Event of Default in
connection with (a) the collection of all sums guarantied hereunder or (b) the
exercise or enforcement of any of the rights, powers or remedies of the
Beneficiaries under this Guaranty or applicable law. All such amounts and all
other amounts payable hereunder shall be payable on demand, together with
interest at a rate equal to the lesser of (i) 9% per annum (based on a year of
360 days and twelve 30-day months), or (ii) the maximum rate allowed by
applicable law, from and including the due date to and excluding the date of
payment.

          SECTION 6.02 AMENDMENTS AND OTHER MODIFICATIONS. No amendment of any
                       ----------------------------------
provision of this Guaranty (including a waiver thereof or consent relating
thereto) shall be effective unless the same shall be in writing and signed by
holders of at least 66-2/3% in unpaid principal amount of the Notes then
outstanding or, in the case of any amendment, waiver or consent modifying of
affecting Article II, Section 6.05 or this Section 6.02, each Beneficiary. Any
waiver or consent relating to any provision of this Guaranty shall be effective
only in the specific instance and for the specific purpose for which given. No
notice to or demand on the Guarantor in any case shall entitle the Guarantor to
any other or further notice or demand in similar or other circumstances.

          SECTION 6.03 CUMULATIVE REMEDIES: FAILURE OR DELAY. The rights and
                       -------------------------------------
remedies provided for under this Guaranty are cumulative and are not exclusive
of any rights and remedies that may be available to the Beneficiaries under
applicable law or otherwise. No failure or delay on the part of any Beneficiary
in the exercise of any power, right or remedy under this Guaranty shall impair
such power, right or remedy or shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or remedy preclude other or
further exercise of such or any other power, right or remedy.

          SECTION 6.04 NOTICES, ETC. All notices and other communications under
                       ------------
this Guaranty shall be in writing and shall be personally delivered or sent by
prepaid courier, by overnight, registered or certified mail (postage prepaid),
or by telecopy, and shall be deemed given when received by the intended
recipient thereof. Unless otherwise specified in a notice given in accordance
with the foregoing provisions of this Section, all notices and other
communications shall be given to the parties hereto at their respective
addresses (or to their respective telecopier numbers) indicated on Schedule
6.04.

          SECTION 6.05 SUCCESSORS AND ASSIGNS. This Guaranty and each amendment
                       ----------------------
hereof shall be binding upon and, subject to the next sentence, inure to the
benefit of the Guarantor, the Beneficiaries and their respective successors and
assigns. The Guarantor shall not assign any of its rights or obligations
hereunder without the

                                      18
<PAGE>
 
prior written consent of the Beneficiaries.  The benefit of this Guaranty shall 
automatically pass with any assignment of the Obligations (or any portion 
thereof), to the extent of such assignment.

               SECTION 6.06  CHOICE OF FORUM.
                             ---------------

               (a)  Pursuant to Section 5-1402 of the New York General 
Obligations Law, all actions or proceedings arising in connection with this 
Agreement shall be tried and litigated in state or Federal courts located in the
Borough of Manhattan, New York City, State of New York, unless such actions or 
proceedings are required to be brought in another court to obtain subject matter
jurisdiction over the matter in controversy.  THE GUARANTOR AND EACH OF THE 
BENEFICIARIES WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON 
                                                                     ----- ---
CONVENIENS, TO ASSERT THAT IT IS NOT SUBJECT TO THE JURISDICTION OF SUCH COURTS 
----------
OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH
THIS SECTION.

               (b)  Nothing contained in this Section shall preclude the 
Beneficiaries from bringing any action or proceeding arising out of or relating 
to this Guaranty in the courts of any place where the Guarantor or any of its 
assets may be found or located.  TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS 
OF ANY SUCH JURISDICTION, THE GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE 
JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH 
ACTION OR PROCEEDING, THE JURISDICTION OF ANY OTHER COURT OR COURTS THAT NOW OR 
HEREAFTER, BY REASON OF SUCH PARTY'S PRESENT OR FUTURE DOMICILE, OR OTHERWISE, 
MAY BE AVAILABLE TO IT.

               SECTION 6.07  SET OFF.  In addition to any rights now or 
                             ------- 
hereafter granted under applicable law and not by way of limitation of any such
rights, upon the occurrence and during the continuance of any Event of Default,
each Beneficiary set forth on Schedule A and each holder or transferee of any
Obligations or any Person with any interest therein (provided that such holder
or transferee or other Person has notified the Guarantor in writing of its
status as such) is hereby irrevocably authorized by the Guarantor, at any time
or from time to time, without notice to the Guarantor or to any other Person,
any such notice being hereby expressly waived, to set off and to appropriate and
to apply any and all deposits (general or special, including certificates of
deposit, whether matured or unmatured, but not including trust accounts) and any
other indebtedness, in each case whether direct or indirect or contingent or
matured or unmatured at any time held or owing by such Beneficiary, such holder,
such transferee or such other Person, to or for the credit or the account of the
Guarantor, against and on account of the obligations of the Guarantor to such
Beneficiary, such holder, such transferee, or such other Person under this
Guaranty, irrespective of whether or not such Beneficiary, such holder, such
transferee or such other Person shall have made any demand for payment and
although such obligations may be contingent and unmatured.


               SECTION 6.08  COMPLETE AGREEMENT.  This Guaranty, together with 
                             ------------------
the exhibits and schedules hereto, is intended by the parties as the final 
expression of their agreement regarding the subject matter hereof and as a 
complete and exclusive statement of the terms and conditions of such agreement.

                                      19

<PAGE>
 
          SECTION 6.09 LIMITATION OF LIABILITY. No claim shall be made by the 
                       -----------------------
Guarantor against any Beneficiary or the Affiliates, directors, officers, 
employees or agents of any Beneficiary for any special, indirect, consequential 
or punitive damages in respect of any claim for breach of contract or under any 
other theory of liability arising out of or related to the transactions 
contemplated by this Guaranty, or any act, omission or event occurring in 
connection therewith; and the Guarantor waives, releases and agrees not to sue 
upon any claim for any such damages, whether or not accrued and whether or not 
known or suspected to exist in its favor.

          SECTION 6.10 RELIANCE ON AND SURVIVAL OF REPRESENTATIONS. All 
                       -------------------------------------------
agreements, representations and warranties of the Guarantor herein and in any 
certificates or other instruments delivered pursuant to this Guaranty shall (a) 
be deemed to be material and to have been relied upon by the Beneficiaries, 
notwithstanding any investigation heretofore or hereafter made by the 
Beneficiaries or on their behalf, and (b) survive the execution and delivery of 
this Guaranty.

          SECTION 6.11 REPRODUCTION OF DOCUMENTS. The Guarantor acknowledges the
                       -------------------------
provisions pertaining to reproduction of documents and related matters set forth
in Section 15.13 of the Agreements and agrees that the same provisions shall 
apply with respect to this Guaranty and all documents related hereto.

          SECTION 6.12 GOVERNING LAW. This Guaranty shall be governed by, and 
                       -------------
construed in accordance with, the laws (other than the rules regarding conflicts
of laws except those contained in New York General Obligations Law Section 
5-1401) of the State of New York. No reference herein to any provision of 
California law shall be construed as a waiver of or otherwise impair the 
foregoing choice of New York law.

          SECTION 6.13 WAIVER OF TRIAL BY JURY. THE GUARANTOR AND THE 
                       -----------------------
BENEFICIARIES (BY ACCEPTANCE HEREOF) WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY 
ACTION UNDER THIS GUARANTY OR ANY ACTION ARISING OUT OF THE TRANSACTIONS 
CONTEMPLATED HEREBY, REGARDLESS OF WHICH PARTY INITIATES SUCH ACTION OR ACTIONS.

                                      20
<PAGE>
 
               IN WITNESS WHEREOF, the Guarantor has duly executed this Guaranty
as of the date set forth above.


                                      GUARANTOR:
                                      ---------
                                      
                                      NATIONAL GOLF PROPERTIES, INC.
                                      -----------------------------

                                      By:/s/ Edward R. Sause
                                         --------------------------       

                                      Name:  EDWARD R. SAUSE
                                           ------------------------

                                      Title: EXECUTIVE VICE PRESIDENT 
                                            -----------------------

                                      21