Document:

Exhibit 10.1

SEVERANCE AND GENERAL RELEASE AGREEMENT

 

This
Severance and General Release Agreement (“Agreement”) is made and
entered into effective as of February 1, 2008 (the “Effective Date”)
by and between the following Parties:  (i) Heeling
Sports Limited, a Texas limited partnership (the “Company”) and (ii) Michael
G. Staffaroni (the “Employee”). 
The Company and the Employee are collectively referred to herein as the “Parties.”

 

WHEREAS,
beginning on or about July 24, 2000, the Employee was engaged by the
Company as Chief Executive Officer, and then became employed as Chief Executive
Officer as of January 16, 2001 and as President in 2006;

 

WHEREAS,
effective as of May 19, 2006, the Employee and the Company entered into an
AMENDED AND RESTATED EMPLOYMENT AGREEMENT, INCLUDING AGREEMENT TO ARBITRATE,
NONCOMPETITION AGREEMENT, AND NONDISCLOSURE AGREEMENT, a true and correct
conformed copy of which is attached as Exhibit A to this Agreement (the “Employment
Agreement”);

 

WHEREAS,
as of the Effective Date, the Employee’s employment with the Company ended due
to Employee’s resignation;

 

WHEREAS,
the Employee, on the one hand, and the Company, on the other hand, desire to
compromise and settle fully and finally, by the execution of this Agreement,
all claims and causes of action of any kind whatsoever, whether known or
unknown, which have arisen prior to or at the time of the execution of this
Agreement, for any matter, including, but in no way limited to, any and all
claims, controversies and causes of action arising out of or related to the
Employee’s employment with and/or departure from the Company, and the terms and
amount of severance payable to Employee under the Employment Agreement, and the
Parties are desirous of reducing this Agreement to writing;

 

NOW,
THEREFORE, in full compromise, release and settlement, accord and satisfaction,
and discharge of all claims and causes of action, known or unknown, possessed
by or belonging to the Employee on the one hand, and the Company on the other
hand, for and in consideration of the above recitals and the mutual promises,
covenants and agreements set forth herein, and the benefits flowing therefrom,
and other good and valuable consideration, the adequacy of which the Parties
hereby acknowledge for all purposes, including the purpose of enforcing this
Agreement, the Parties to this Agreement covenant and agree as follows:

 

1.                                       Mutual General Releases:

 

a.                                       Employee, individually, and
on behalf of, as applicable, Employee’s current, former, and successor
attorneys, representatives, guardians, heirs, assigns, successors, executors,
administrators, insurers, servants, agents, employees, affiliates, and entities
does hereby GENERALLY RELEASE, ACQUIT, AND DISCHARGE the Company, and as
applicable, its respective current, former, and successor officers, employees,
agents, attorneys, assigns, representatives, directors, shareholders, owners,
servants, administrators, insurers, parents, 

 

 

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subsidiaries, affiliates, and related corporations, firms,
associations, partnerships, and entities, specifically including the Other
Heelys Releasees (as defined below), from any and all Claims and Controversies
(as defined below), including without limitation, any and all obligations under
the Employment Agreement; provided, however, that nothing in this
Agreement will be considered a release of Employee’s claims, if any, for vested
employment benefits pursuant to the Employee Retirement Income Security Act of
1974 as amended, worker’s compensation insurance coverage, and/or unemployment
insurance coverage, or the Company’s breach of this Agreement.

 

b.                                      The Company does hereby
GENERALLY RELEASE, ACQUIT, AND DISCHARGE the Employee, individually, and as
applicable, Employee’s current, former, and successor attorneys,
representatives, guardians, heirs, assigns, successors, executors,
administrators, insurers, servants, agents, employees, affiliates, and
entities, from any and all Claims and Controversies; provided, however,
that nothing in this Agreement will be considered a release of the Company’s
claims, if any, for the Employee’s breach of this Agreement.

 

c.                                       Notwithstanding anything to
the contrary herein, the Company or Heelys, Inc.’s obligations to Employee
under that certain Indemnification Agreement, effective August 31, 2006
(the “Indemnification Agreement”), and this Agreement are not released,
are not affected, and expressly survive the release herein in all
respects.  Similarly, the Company or
Heelys, Inc.’s indemnification obligations to Employee under Heelys, Inc.’s
Articles of Incorporation and ByLaws or at law are not released, are not
affected, and expressly survive the release herein.  As of the Effective Date of this Agreement,
to the Company’s knowledge, Employee has fully complied with the
Indemnification Agreement.

 

2.                                       Definitions:

 

a.                                       For the purposes of this
Agreement, including without limitation Section 1 of this Agreement, the
term “Other Heelys Releasees” means all affiliates of the Company and
all of their respective officers and directors.

 

b.                                      For the purpose of this
Agreement, the term “Claims and Controversies” means the following:  all claims, debts, damages, demands,
liabilities, benefits, suits in equity, complaints, grievances, obligations,
promises, agreements, rights, controversies, costs, losses, remedies, attorneys’
fees and expenses, back pay, front pay, severance pay, percentage recovery,
injunctive relief, lost profits, emotional distress, mental anguish, personal
injuries, liquidated damages, punitive damages, disability benefits, fraud,
interest, expert fees and expenses, reinstatement, other compensation, suits,
appeals, actions, and causes of action, of whatever kind or character,
including, but not limited to, any dispute, claim, charge, or cause of action
arising under the Civil Rights Act of 1964, Title VII, 42 U.S.C. §§ 2000e et seq., as amended (including the Civil
Rights Act of 1991), the Civil Rights Act of 1866, 42 U.S.C. §§ 1981 et seq., as amended, the Equal Pay Act, 29
U.S.C. §§ 201 et seq., as amended,
the Americans with Disabilities Act of 

 

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1990, 42 U.S.C. §§ 12101 et seq.,
as amended, the Age Discrimination in
Employment Act, 29 U.S.C. §§ 621 et seq.,
as amended, the Employee Retirement Income Security Act of 1974, 29
U.S.C. §§ 1001 et seq., as
amended, the Fair Labor Standards Act of 1938, 29 U.S.C. §§ 201 et seq., as amended, the Family and
Medical Leave Act, 29 U.S.C. §§ 2601 et seq.,
as amended, the Labor Management Relations Act, 29 U.S.C. §§ 141 et seq., as amended, the Employee
Polygraph Protection Act, 29 U.S.C. §§ 2001 et
seq., as amended, RICO, 18 U.S.C. §§ 1961 et seq., as amended, the Occupational Safety and Health
Act, 29 U.S.C. §§ 651 et seq., as
amended, the Texas discrimination, retaliation, and wrongful discharge laws,
including without limitation Tex. Lab. Code §§ 21.001 et seq., 451.001, and 411.082, as amended,
Tex. Civ. Prac. & Rem. Code § 122.001, as amended, Tex. Gov’t. Code §§
431.005, 431.006, 554.001, and 554.002, as amended, Tex. Elec. Code §§ 253.102,
276.001, and 276.004, as amended, and Tex. Health & Safety Code §§
81.102 and 165.002, as amended, the Texas pay day laws, including without
limitation Tex. Lab. Code §§ 61.001 et seq. and
62.001 et seq., as amended, and all other
constitutional, federal, state, local, and municipal law claims, whether
statutory, regulatory, common law or otherwise, arising out of or relating to
any and all disputes now existing between Employee and the Company, whether
related to or in any way growing out of, resulting from, or to result from the
Employee’s employment with the Company and/or termination or resignation from
employment with the Company, for or because of any matter or thing done,
omitted, or allowed to be done by, the Employee, the Company or the Other
Heelys Releasees, for any incidents, including those past and present, which
existed at any time prior to and/or contemporaneously with the Effective Date
of this Agreement, including all past, present, and future damages, injuries,
costs, expenses, fees, effects, and results in any way related to or connected
with such incidents.

 

c.                                       Notwithstanding anything to
the contrary herein, the Company or Heelys, Inc.’s obligations to Employee
under the Indemnification Agreement and this Agreement are not released, are
not affected, and expressly survive the release herein in all respects.  Similarly, the Company or Heelys, Inc.’s
indemnification obligations to Employee under Heelys, Inc.’s Articles of
Incorporation and ByLaws or at law are not released, are not affected, and
expressly survive the release herein.  As
of the Effective Date of this Agreement, to the Company’s knowledge, Employee
has fully complied with the Indemnification Agreement.

 

3.                                         Severance
Compensation Terms:  Subject to the
terms of Sections 7 and 15 herein, the Parties agree to the
following terms of severance compensation (“Severance Compensation”):

 

a.                                       The Company shall pay
Employee or his Estate fourteen (14) months severance amounting to the total
sum of FOUR HUNDRED AND SIXTY-SIX THOUSAND, SIX HUNDRED AND SIXTY-SIX AND
67/100 DOLLARS ($466,666.67), minus tax-related deductions (the “Severance
Proceeds”), in full compromise and settlement.  The Severance Proceeds will be paid out (i) over
a five month period, in ten (10) semi-monthly installments of SIXTEEN 

 

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THOUSAND, SIX HUNDRED AND SIXTY-SIX AND 67/100 DOLLARS ($16,666.67), in
accordance with the normal payroll practices and policies of the Company,
beginning six (6) months after the Effective Date, followed by (ii) one
lump sum payment of THREE HUNDRED THOUSAND AND 00/100 DOLLARS ($300,000.00), in
the month following the completion of the installment payments, in all cases
minus tax-related deductions.  The Severance
Proceeds are in addition to any compensation previously accrued or paid to
Employee.

 

b.                                      If Employee elects
continuation coverage (with respect to Employee’s coverage and/or any eligible
dependent coverage) under the Consolidated Omnibus Budget Reconciliation Act of
1985 (“COBRA Continuation Coverage”) with respect to the Company’s group
health insurance plan, Employee will be responsible for payment of the monthly
cost of COBRA Continuation Coverage, provided, however, the Company will
reimburse Employee for the monthly cost of all COBRA Continuation Coverage net
of all co-pay amounts (if any) Employee would have paid had Employee’s
employment continued pursuant to Exhibit A.  Such COBRA Continuation Coverage payments by
the Company will apply to the fourteen (14) month period following the
Effective Date; provided, however, that nothing herein will affect
Employee’s rights to COBRA Continuation Coverage, at Employee’s expense,
following the Effective Date.

 

c.                                       The Company will reimburse
Employee for the cost of the $500,000 life insurance policy from First Colony
Life Insurance Company.  Such
reimbursement by the Company will apply to the fourteen (14) month period
following the Effective Date; provided, however, that nothing herein
will affect Employee’s rights to obtain life insurance at Employee’s expense,
following the Effective Date.  The
Company will reimburse Employee for the monthly cost of such life insurance
policy on the first regular payroll date of the Company each month.  Notwithstanding the preceding sentence, or
any provision in this Agreement to the contrary, no reimbursement for the cost
of the life insurance policy will be paid within six (6) months following
the Effective Date, in order for this Agreement to satisfy the requirements with
respect to a “specified employee” as provided under Section 409A of the
Internal Revenue Code of 1986, as amended, and the Treasury Regulations
promulgated thereunder (“Section 409A”).  A single sum cash payment will be made on the
date that is six (6) months and one (1) day from the Effective
Date.  Such single sum cash payment will
include the cumulative amounts that would have otherwise been paid to Employee
during the six (6) month delay period, without interest.  Thereafter, monthly reimbursement payments
will resume as described above.

 

4.                                       Expenses and Accrued Leave:

 

a.                                       Subject to Employee’s
compliance with all applicable expense policies and procedures, the Company
will reimburse Employee for all reasonable accrued but unpaid travel, lodging,
long distance telephone and other business costs and expenses reasonably
incurred by Employee while rendering Services pursuant to 

 

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Exhibit A, through and including the Effective Date.  Notwithstanding the preceding sentence, or
any provision in the applicable expense reimbursement policy or procedure to
the contrary, if an expense reimbursement would constitute taxable income to
Employee:  (i) the amount of
expenses eligible for reimbursement during any calendar year shall not affect
the amount of expenses eligible for reimbursement in any other calendar year; (ii) the
reimbursement of an eligible expense shall be made on or before December 31
of the calendar year following the calendar year in which the expense was
incurred; and (iii) the right to reimbursement for expenses shall not be
subject to liquidation or exchange for another benefit.

 

b.                                      The Company will pay
Employee an amount equal to all accrued and unused vacation and personal day
pay through and including the Effective Date, calculated in accordance with the
Company’s vacation and personal day policies, practices, and procedures.  Such payment will be made in a single sum
payment within sixty (60) days of the Effective Date.

 

5.                                         No Admission of
Liability:  The Parties
stipulate that by discussing and/or entering into this Agreement, the Parties
do not admit, and they specifically deny, any violation of any constitutional,
federal, state, local, or municipal law, whether, statutory, regulatory, common
law, or otherwise.  Neither the proposal
of this Agreement nor the Parties’ execution of it shall in any way be
construed as an admission of liability in any legal, arbitral, or
administrative proceeding.  This
Agreement has been entered into in release and compromise of the Claims and
Controversies and other matters as stated herein and to avoid the expense and
burden of dispute resolution.

 

6.                                       Statement of
Understanding:  By
executing this Agreement, Employee acknowledges that (a) Employee has been
given at least twenty-one (21) days to consider the terms of this Agreement,
and has either considered it for that period of time or knowingly and
voluntarily waived the right to do so; (b) Employee has been advised by
virtue of this part of the Agreement to consult with an attorney regarding the
terms of this Agreement; (c) Employee has consulted with, or had
sufficient opportunity to consult with, an attorney of  Employee’s own choosing regarding the terms
of this Agreement; (d) Employee has read this Agreement and fully
understands the terms of this Agreement and their import; (e) except as
provided by this Agreement, Employee has no contractual right or claim to the
payments and benefits described herein; (f) the consideration provided for
herein is good and valuable; and (g) Employee
is entering into this Agreement voluntarily, of Employee’s own free will, and
without any coercion, undue influence, threat, or intimidation of any kind.

 

7.                                       Revocation:  Within the seven (7) consecutive
calendar days following Employee’s execution of this Agreement (the “Revocation
Period”), Employee may revoke this Agreement by written notice sent by BOTH
fax and first class mail to the Company in care of its attorney, Kenneth C.
Broodo, Gardere Wynne Sewell LLP, 1601 Elm Street, Suite 3000, Dallas,
Texas  75201-4761, fax number (214)
999-3626.  If

 

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Employee revokes this Agreement, the Employee shall
have no right or entitlement to receive (as applicable) any of the Severance
Compensation described in Section 3 of this Agreement.  Employee understands that if the Company does
not receive notice of revocation prior to the expiration of the Revocation
Period, Employee shall have forever waived the right to revoke this Agreement,
and this Agreement and all of its terms shall have full force and effect.

 

8.                                       Return of Property:  The Employee shall return to the Company all
of its property and that of the Other Heelys Releasees within Employee’s
possession, custody, or control, including without limitation, all originals
and copies of all materials and documents, all equipment, and all hardcopy
and/or computer-based documents, books, records, videos, disks, data files,
audio and video recordings, and other things pertaining to the Company or
containing its information, whether obtained directly or indirectly from the
Company and with or without its knowledge or consent (collectively, “the
Company Information”).  The Employee
warrants and represents that he will not directly or indirectly duplicate,
replicate, or otherwise retain any copies of any Company Information in any
form or fashion.  Within three (3) business
days of executing this Agreement, the Employee will return the Company
Information by hand delivery to Heelys, c/o Kenneth C. Broodo, Gardere Wynne
Sewell LLP, 1601 Elm Street, Suite 3000, Dallas, Texas  75201-4761. 
Notwithstanding the foregoing provisions in this paragraph 8, Employee’s
attorney(s) may retain information and documents provided to them by
Employee in connection with seeking legal advice relating to this Agreement and
his employment with the Company.

 

9.                                       Protection of Confidential
Information:

 

a.                                       Employee acknowledges that
he has had access to and has become familiar with various trade secrets and
proprietary and confidential information of the Company, including, but not
limited to, the identity, responsibility, and/or income of employees, costs of
doing business, financial information, formulas, processes, and suppliers,
compilations of information, records, customer information, methods of doing
business, information about past, present, pending, and/or planned
transactions, and other confidential information (collectively referred to as “Confidential
Information”), which are owned by the Company and regularly used in the
operation of its business, and as to which the Company takes precautions to
prevent dissemination to persons other than certain directors, officers, and
employees.  Employee acknowledges that
the Confidential Information (i) is secret and not known in the industry; (ii) gives
the Company an advantage over competitors who do not know or use the
Confidential Information; (iii) is of such value and nature as to make it
reasonable and necessary to protect and preserve the confidentiality and
secrecy of the Confidential Information; and (iv) constitutes a valuable,
special, and unique asset of the Company, the disclosure of which could cause
substantial injury and loss of profits and goodwill to the Company.

 

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b.                                      Employee shall not in any
way use or disclose any Confidential Information, directly or indirectly, at
any time in the future, and shall otherwise protect such information from
unauthorized use or disclosure by others. 
All files, records, documents, information, data, and similar items
relating to the business of the Company, whether prepared by Employee or otherwise
coming into his possession, will remain the exclusive property of Company, and
in any event must be promptly delivered to the Company upon execution of this
Agreement.  Confidential Information does
not include material, data, documents, and/or information that the Company has
voluntarily placed in the public domain; that has been lawfully and
independently developed and publicly disclosed by third parties; that
constitutes the general knowledge and skills gained by Employee during the time
period of his employment with the Company; or that otherwise enters the public
domain through lawful means.

 

10.                                 Survival of Employment
Terms; Restrictive Covenants:

 

a.                                       The contractual terms stated
in Exhibit A that apply post-employment, including without limitation such
terms stated in paragraphs 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19,
20, and 21 of Exhibit A (including subparts), shall survive the execution
of this Agreement and continue in full force and effect, subject to the
modifications stated in this Agreement. 
The Employment Period as referenced in paragraphs 8 and 9 of Exhibit A
is deemed to end on the date of this Agreement.

 

b.                                      The Noncompetition Term
defined in paragraph 11 of Exhibit A (“Noncompetition Term”) is
hereby modified from one (1) year to six (6) months with regard to
competitive business activities other than that based on wheeled footwear
products that compete with products of the Company; provided, however,
that the Noncompetition Term shall continue to apply for the full year stated
in Exhibit A, with regard to competitive business activities based on any
and all wheeled footwear products that compete with products of the Company and
for purposes of paragraph 12 of Exhibit A; provided further, that
the terms of paragraphs 11 and 12 of Exhibit A shall otherwise survive the
execution of this Agreement and continue in full force and effect.  The post-employment portion of the
Noncompetition Term, as partially modified by this Agreement, shall commence
upon the Effective Date of this Agreement.

 

c.                                       The Company acknowledges the
Employee’s disclosure of business discussions with a third party (the “Third
Party”) over a possible licensing agreement for the use of a brand name in
conjunction with a line of Company footwear, as disclosed through Employee’s
weekly report to the Board of the Company in January 2008, with terms to
be negotiated (“Licensing Discussions”). 
The Employee shall not engage in any similar Licensing Discussions of
any kind with the Third Party, during the twelve (12) month period following
the Effective Date; provided that, the restrictive covenants referenced
in Exhibit A and in this Agreement shall continue to apply at all times
within the Noncompetition Term, as partially modified by this Agreement.

 

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11.                                 Mutual Non-Disparagement:  Employee, on his own behalf, and the Company,
solely on behalf of its employees at the vice president level and above who
have actual authority to speak or act on the subject described herein, shall
not make any statements, comments, or communications in any form, oral,
written, or electronic, which would constitute libel, slander, or disparagement
of one another; provided, however, that the terms of this Section shall
not apply to communications between the Parties and as applicable, their
attorneys or other persons with whom communications would be subject to a claim
of privilege existing under common law, statute, or rule of
procedure.  Where applicable, this mutual
non-disparagement agreement applies to any public or private statements,
comments, or communications in any form, oral, written, or electronic.  The Parties shall not in any way solicit any
such statements, comments or communications from others.  Subject to the terms of this provision, the
Company may issue a press release regarding Employee’s resignation from the
Company.  Prior to issuance of the
referenced press release Employee shall be permitted to review the release and
to provide comments to it.  The Parties shall
mutually agree on the language concerning Employee’s resignation and related
matters.

 

12.                                 Payment Termination;
Liquidated Damages:  In the
event that Employee commits a material breach of the terms of the foregoing
Sections 9 and/or 10 of this Agreement (including the restrictive covenants
stated in Exhibit A), the Company may forever terminate payment of all
remaining Severance Compensation payments, and the Employee shall become
immediately liable to the Company for liquidated damages in the amount of
ninety percent (90%) of all Severance Compensation paid to Employee by the
Company.  The Parties stipulate that such
liquidated damages are reasonable considering that this Agreement has intrinsic
value for the Company because of its complete confidentiality and other
protections, and further considering that in the event of such a breach, the
Company’s actual damages will be difficult and impractical to ascertain, so
that the stated liquidated damages will be just and proper compensation for any
damages caused by any breach for which this Section applies; provided,
however, that the Company may make an election of remedies for actual
damages, to the extent that it can prove recoverable actual damages in excess
of the liquidated damages stated in this Section of the Agreement.  Notwithstanding any requirement that the
Employee pay damages as provided in this Section, the remaining provisions of
this Agreement will remain in full force and effect.

 

13.                                 Resignation; Securities
Filings:  As of the Effective Date, the
Employee resigns from his employment with the Company and all Company
affiliates and subsidiaries, as applicable, and from any and all positions as
an officer or director, or both, of the Company and all Company affiliates and
subsidiaries.  This Agreement will be
disclosed in an 8-K filing and/or other required securities filings with the
Securities and Exchange Commission, as applicable.

 

14.                                 Waiver of Re-employment:  The Employee waives and releases forever any
right or rights he might have to employment, reemployment, or reinstatement
with the Company or the Other Heelys Releasees, for now and any time in the
future, and 

 

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agrees not to seek or make application for employment with either the
Company or the Other Heelys Releasees.

 

15.                                 Section 409A Compliance:  This Agreement shall be construed and
interpreted to the maximum extent possible in a manner to avoid any adverse tax
consequences to Employee under Section 409A.  If the Company or Employee reasonably
determines that any compensation or benefits payable under this Agreement may
be subject to Section 409A, the Company and Employee shall work together
to adopt such amendments to this Agreement or adopt other policies or
procedures (including amendments, policies and procedures with retroactive
effect), or take any other commercially reasonable actions necessary or
appropriate to:  (a) exempt the
compensation and benefits payable under this Agreement from Section 409A
and/or to preserve the intended tax treatment of the compensation and benefits
provided with respect to this Agreement or (b) comply with the
requirements of Section 409A.

 

16.                                 Entire Agreement:  This Agreement constitutes the entire
Agreement of the Parties with regard to the subject matter of this Agreement,
and supersedes all prior and contemporaneous negotiations and agreements, oral
or written, with regard to the same subject matter, except for
the contractual terms stated in Exhibit A that apply post-employment,
including without limitation such terms stated in paragraphs 6, 7, 8, 9, 10,
11, 12, 13, 14, 15, 16, 17, 18, 19, 20, and 21 of Exhibit A (including
subparts), subject to the modifications stated in this Agreement.  All prior and contemporaneous negotiations
and agreements regarding the subject matter of this Agreement are deemed
incorporated and merged into this Agreement and are deemed to have been
abandoned if not so incorporated, subject to the exceptions stated in
this Section.  In the event of an
irreconcilable conflict between the surviving provisions of Exhibit A and
the provisions of this Agreement, this Agreement shall govern.  No representations, oral or written, are
being relied upon by either Party in executing this Agreement other than the
express representations set forth in this Agreement.  The Parties have each entered into this
Agreement based on their own independent judgment.  This Agreement cannot be changed or
terminated without the express written consent of the Parties.

 

17.                                 Other Documentation:  The Parties agree to promptly execute,
acknowledge and deliver all further documents and instruments that may be
necessary or convenient to consummate this Agreement; and to execute,
acknowledge, attest and deliver all additional documents, instruments, consents
and approvals necessary or advisable to more fully evidence and perfect each
Party’s rights and obligations described in this Agreement.

 

18.                                 Non-Waiver:  One or more waivers of a breach of any
covenant, term, or provision of this Agreement by any Party shall not be
construed as a waiver of a subsequent breach of the same covenant, term or
provision; nor shall it be considered a waiver of any other then existing,
preceding, or subsequent breach of a different covenant, term, or provision.

 

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19.                                 Authority:  The Employee hereby acknowledges and
expressly warrants and represents for himself, and for his predecessors,
successors, assigns, heirs, executors, administrators, and legal
representatives, as applicable, that he (a) is legally competent and
authorized to execute this Agreement; (b) has not assigned, pledged, or
otherwise in any manner, sold or transferred, either by instrument in writing
or otherwise, any right, title, interest, or claim that he may have by reason
of any matter described in this Agreement; (c) has the full right and
authority to enter into this Agreement and to consummate the covenants
contemplated herein; and (d) will execute and deliver such further
documents and undertake such further actions as may reasonably be required to
effect any of the agreements and covenants in this Agreement.  The Company hereby represents that this
Agreement has been duly authorized by the Company and that the person executing
this Agreement on behalf of the Company is authorized to execute this
Agreement..

 

20.                                 Severability:  If any provision or term of this Agreement is
held to be illegal, invalid, or unenforceable, such provision or term shall be
fully severable; this Agreement shall be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised part of this
Agreement; and the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement.  Furthermore, in lieu of each such illegal,
invalid, or unenforceable provision or term there shall be added automatically
as a part of this Agreement another provision or term as similar to the
illegal, invalid, or unenforceable provision as may be possible and that is
legal, valid, and enforceable.

 

21.                                 Attorneys’ Fees in the Event
of Breach:  The Parties
agree that should a Party to this Agreement make a claim against another Party
to this Agreement for a breach of any provision of this Agreement, the
prevailing Party shall be entitled to recover its attorneys’ fees, expenses,
and costs.  The Parties hereby agree that
each Party shall have the right to seek specific performance of this Agreement,
and declaratory and injunctive relief.

 

22.                                 Governing Law; Exclusive
Venue:  All questions concerning the
construction, validity and interpretation of this Agreement and its exhibits
will be governed by and construed in accordance with the laws of the State of
Texas without giving effect to any choice of law or conflict of law provision
or rule (whether of Texas or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than Texas, unless preempted
by federal law or otherwise stated in this Agreement.  The Parties consent, stipulate and agree that
the exclusive venue of any lawsuit, arbitration, or other proceeding referenced
in, arising from, or related to this Agreement shall be Dallas, Texas.

 

23.                                 No Assignment:  The Employee shall not assign any of his
rights under this Agreement, or delegate the performance of any of his duties
hereunder, without the prior written consent of the Company.

 

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24.                                 Successors and Assigns: All of the provisions
of this Agreement shall be binding upon and inure to the benefit of the Parties
hereto and their respective heirs, if any, successors, and permitted
assigns.  The merger or consolidation of
the Company into or with any other entity shall not terminate this Agreement.

 

25.                                 Construction:  The Parties were each fully represented by
counsel in negotiating this Agreement. 
The language of all parts of this Agreement shall in all cases be
construed as a whole, according to its fair meaning, and not strictly for or
against any Party.  As used in this
Agreement, the singular or plural number shall be deemed to include the other
whenever the context so indicates or requires.

 

26.                                 Counterparts:  It is understood and agreed that this
Agreement may be executed in multiple originals and/or counterparts, each of
which shall be deemed an original for all purposes, but all such counterparts
together shall constitute one and the same instrument.

 

27.                                 Headings:  The headings of this Agreement are for
purposes of reference only and shall not limit or define the meaning of the
provisions of this Agreement.

 

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IN
WITNESS WHEREOF, THE PARTIES, INTENDING TO BE LEGALLY BOUND BY THIS AGREEMENT,
HAVE DULY EXECUTED THIS AGREEMENT, AS OF THE DATES INDICATED BELOW:

 

	
  COMPANY:

  	
  HEELING
  SPORTS LIMITED, A TEXAS LIMITED

  
	
   

  	
  PARTNERSHIP

  
	
   

  	
   

  
	
  Address:

  	
  By:

  	
  Heeling
  Management Corp.,

  
	
   

  	
   

  	
  Its
  sole general partner

  
	
  3200
  Belmeade Drive

  	
   

  
	
  Suite 100

  	
  By:

  	
  /s/
  Gary L. Martin

  	
   

  
	
  Carrollton
  TX 75006

  	
  Name:

  	
  Gary
  L. Martin

  	
   

  
	
   

  	
  Title:

  	
  Chairman

  	
   

  
	
   

  	
   

  
	
   

  	
  Date:
  February 1, 2008

  
					

 

	
  EMPLOYEE:

  	
  MICHAEL
  G. STAFFARONI

  
	
  Address:

  	
   

  
	
   

  	
  /s/
  MICHAEL G. STAFFARONI

  	
   

  
	
  2817
  Milton

  	
   

  
	
  Dallas
  TX 75205

  	
  Date:
  February 1, 2008

  

 

 

 

12Exhibit 10.1

 

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF SOUTH CAROLINA

FLORENCE DIVISION

 

	
   

  	
  Larry D. Young, Danny L. Young,

  	
  )

  	
   

  	
   

  
	
   

  	
  Kyle N. Young, the Young Family

  	
  )

  	
   

  	
   

  
	
   

  	
  Irrevocable Trust, and The Legends

  	
  )

  	
   

  	
   

  
	
   

  	
  Group, Ltd.,

  	
  )

  	
   

  	
   

  
	
   

  	
   

  	
  )

  	
   

  	
   

  
	
   

  	
                           Plaintiffs,

  	
  )

  	
  CA NO. 
  4:04-902-25

  	
   

  
	
   

  	
   

  	
  )

  	
   

  	
   

  
	
   

  	
  v.

  	
  )

  	
  SETTLEMENT AGREEMENT

  	
   

  
	
   

  	
   

  	
  )

  	
   

  	
   

  
	
   

  	
  BDO Seidman, LLP, Fred Walton,

  	
  )

  	
   

  	
   

  
	
   

  	
  Kurt Huntzinger, Chris Truitt, Golf

  	
  )

  	
   

  	
   

  
	
   

  	
  Trust of America, Inc., Bradley

  	
  )

  	
   

  	
   

  
	
   

  	
  Blair and Scott Peters,

  	
  )

  	
   

  	
   

  
	
   

  	
   

  	
  )

  	
   

  	
   

  
	
   

  	
                           Defendants

  	
   

  	
  )

  	
   

  	
   

  
						

 

This SETTLEMENT AGREEMENT (“Agreement”)
entered into effective the 31st day of January, 2008, by and among (i) LARRY
D. YOUNG, DANNY L. YOUNG, KYLE N. YOUNG, THE YOUNG FAMILY IRREVOCABLE TRUST,
and THE LEGENDS GROUP, LTD. (collectively, the “Legends Plaintiffs”),
and (ii) GOLF TRUST OF AMERICA, INC. (“GTA”), W. BRADLEY BLAIR, II,
and SCOTT D. PETERS (collectively, the “GTA Defendants”) (collectively,
the Legends Plaintiffs and the GTA Defendants shall be referred to as the “Parties”);

 

W I T N E S S
E T H:

 

WHEREAS, on March 22,
2004, the Legends Plaintiffs filed a lawsuit against the GTA Defendants, among
others, in the United States District Court for the District of South Carolina,
Florence Division (the “Court”), entitled Larry D. Young, et al. v.
BDO Seidman, LLP, et al., Case No. 4:04-902-25 (the “Litigation”),
alleging, inter alia, that the GTA Defendants had
conspired with BDO Seidman, LLP (“BDO”), and its affiliates Fred Walton,
Kurt Huntzinger, and Chris Truitt to 

 

1

 

induce the Legends Plaintiffs to enter into a
fraudulent tax scheme with BDO to enrich BDO and support an exaggerated value
of GTA; and

 

WHEREAS, on November 4,
2004, the GTA Defendants filed their Answer and Counterclaims in the
Litigation, alleging, inter alia,
that: a) the Legends Plaintiffs were obligated to indemnify the GTA Defendants
from any liabilities related to the Legends Plaintiffs’ complaint; b) the
Legends Plaintiffs had breached the February 14, 2001 Confidentiality
Agreement; c) the Legends Plaintiffs’ breach of the February 14, 2001
Confidentiality Agreement was accompanied by intentionally fraudulent,
deceptive and misleading acts on the part of the Legends Plaintiffs; d) the
Legends Plaintiffs fraudulently induced the GTA Defendants into executing the February 14,
2001 Confidentiality Agreement and into allowing the GTA Defendants’ affiliates
to execute the February 14, 2001 Purchase and Sale Agreement with the
Legends Plaintiffs’ affiliates; e) the Legends Plaintiffs had committed fraud
against the GTA Defendants through the Legends Plaintiffs’ representations to
the GTA Defendants in connection with the February 14, 2001
Confidentiality Agreement; f) the Legends Plaintiffs had violated the South
Carolina Unfair Trade Practices Act; g) the Legends Plaintiffs’ negligent
misrepresentations induced the GTA Defendants to enter into the February 14,
2001 Confidentiality Agreement; h) the Legends Plaintiffs conspired for the
purpose of injuring the GTA Defendants; and i) Larry D. Young breached his
fiduciary duty as a board director of GTA;

 

WHEREAS, on December 23,
2005, the GTA Defendants filed a motion to dismiss pursuant to Rule 12(b)(6),
or, in the alternative, a motion for summary judgment pursuant to Rule 56,
as to the Legends Plaintiffs’ civil conspiracy claim against the GTA
Defendants;

 

WHEREAS, on July 13, 2006,
the Court denied the GTA Defendants’ motion to dismiss pursuant to Rule 12(b)(6),
or, in the alternative, a motion for summary judgment pursuant to Rule 56,

 

2

 

as to the Legends Plaintiffs’ civil
conspiracy claim against the GTA Defendants, but granted the GTA Defendants the
right to file another motion for summary judgment within 30 days thereof;

 

WHEREAS, on August 10,
2006, the GTA Defendants filed a motion for summary judgment pursuant to Rule 56
as to the Legends Plaintiffs’ civil conspiracy claim against the GTA
Defendants;

 

WHEREAS, on March 1, 2007,
the Court granted the GTA Defendants’ motion for summary judgment as to the
Legends Plaintiffs’ civil conspiracy claim, based upon a release contained in
the Purchase and Sale Agreement, dated February 14, 2001, between
affiliates of the Parties;

 

WHEREAS, on May 17, 2007,
the GTA Defendants filed their Amended Counterclaims in the Litigation,
alleging, inter alia, that: a)
the Legends Plaintiffs had breached the February 14, 2001 Confidentiality
Agreement; b) the Legends Plaintiffs’ breach of the February 14, 2001
Confidentiality Agreement was accompanied by intentionally fraudulent,
deceptive and misleading acts on the part of the Legends Plaintiffs; c) the
Legends Plaintiffs had violated the South Carolina Unfair Trade Practices Act;
d) the Legends Plaintiffs conspired for the purpose of injuring the GTA
Defendants; and e) Larry D. Young breached his fiduciary duty as a board
director of GTA;

 

WHEREAS, on July 7, 2007,
the Legends Plaintiffs filed a motion for summary judgment pursuant to Rule 56
as to the GTA Defendants’ Amended Counterclaims against the Legends Plaintiffs;

 

WHEREAS, on August 1,
2007, the Court granted in part, and denied in part, the Legends Plaintiffs’ Rule 56
motion for summary judgment as to the GTA Defendants’ Amended Counterclaims,
dismissing the unfair trade practice counterclaim, and denying summary judgment
as to the remaining four counterclaims;

 

3

 

WHEREAS, on August 9,
2007, the Court granted, in part, Legends Plaintiffs’ Motion for Directed Verdict
with regard to GTA Defendants’ counterclaim for breach of contract accompanied
by fraudulent act;

 

WHEREAS, on August 10,
2007, after a 5-day trial with a jury verdict in favor of the GTA Defendants,
the Court entered a judgment (the “Judgment”) in favor of the GTA Defendants,
awarding as follows:  (a) 
$3,726,856.00 (Three Million Seven Hundred Twenty-Six Thousand Eight Hundred
Fifty-Six U.S. Dollars) in favor of GTA and against Larry D. Young with respect
to the breach of fiduciary duty counterclaim; and, (b) $150,000.00 (One
Hundred Fifty Thousand U.S. Dollars) in attorney’s fees, costs and expenses,
pursuant to a stipulation between the Parties, in favor of the GTA Defendants
and against the Legends Plaintiffs, with respect to the breach of Confidentiality
Agreement counterclaim;

 

WHEREAS, on August 20,
2007, the Legends Plaintiffs filed a Rule 59 motion for judgment as a
matter of law, or, in the alternative, for a new trial, and said motion is
pending at this time;

 

WHEREAS, on August 31,
2007, the GTA Defendants filed a Rule 54 motion for attorney’s fees, costs
and expenses, in the total amount of $1,219,779.37, as the prevailing party
with respect to the summary judgment entered on March 1, 2007 in their
favor regarding the Legends Plaintiffs’ civil conspiracy claim, and said motion
is pending at this time; and,

 

WHEREAS, the Parties desire to resolve all of
their disputes, claims, and counterclaims arising out of or related to the
Litigation to avoid the cost, time, and uncertainty of pursuing litigation, and
to fully memorialize the settlement of any claims, demands, or causes of action
relating to the Litigation;

 

4

 

NOW, THEREFORE, in consideration of the
mutual promises, stipulations, agreements and covenants contained herein, and
other good and valuable consideration, the receipt and legal sufficiency of
which hereby are acknowledged, the Parties hereby agree as follows:

 

1.   SETTLEMENT AND COMPROMISE. 
Subject to, and expressly conditioned upon, all of the terms, provisions
and conditions of this entire Agreement, the Parties do hereby for themselves,
and each of their successors, assigns, predecessors in interest, affiliates,
trustees, representatives, insurers, attorneys, agents and employees, agree to
accept and do accept the agreements, promises, warranties, representations,
covenants, stipulations, releases, contingent releases, terms, provisions and
conditions set forth in this Agreement as a complete settlement, compromise,
and accord and satisfaction of all claims, actions, causes of actions,
controversies, disputes, demands, rights, damages, costs, fees, attorneys’
fees, counterclaims, injuries, expenses, suits at law or in equity,
consequential damages, whether personal, property, economic or non-economic, of
every nature in kind whatsoever, whether at law or in equity, whether at common
law or pursuant to federal, state or local statutes, ordinances or regulations,
whether vested or contingent, whether now known or unknown, whether foreseen or
unforeseen, whether liquidated or unliquidated, whether matured or unmatured,
whether disputed or undisputed,  arising prior to the effective date of this
Agreement and arising from and/or related in any way to  the Litigation and/or the
arbitration proceedings between the Legends Plaintiffs and BDO Seidman, LLP,
Fred Walton, Kurt Huntzinger and Chris Truitt initiated pursuant to the Order
filed February 14, 2005, granting BDO Seidman, LLP, Fred Walton, Kurt
Huntzinger and Chris Truitt’s motion to compel arbitration (the “Arbitration”),
and specifically including but not limited to any and all claims and demands
that were actually brought and/or could have been brought in the Litigation
and/or the Arbitration.

 

5

 

2.   RELEASE OF GTA DEFENDANTS. 
In further  consideration of this Agreement,
the Legends Plaintiffs do hereby for themselves, and each of their successors,
assigns, predecessors in interest, affiliates, trustees, representatives,
insurers, attorneys, agents and employees, fully and irrevocably release,
acquit and forever discharge the GTA Defendants and each of their successors,
assigns, predecessors in interest, affiliates, trustees, representatives,
insurers, attorneys, agents and employees, of and from any and all claims,
actions, causes of actions, controversies, disputes, demands, rights, damages,
costs, fees, attorneys’ fees, counterclaims, injuries, expenses, suits at law
or in equity, consequential damages, whether personal, property, economic or non-economic,
of every nature in kind whatsoever, whether at law or in equity, whether at
common law or pursuant to federal, state or local statutes, ordinances or
regulations, whether vested or contingent, whether now known or unknown,
whether foreseen or unforeseen, whether liquidated or unliquidated, whether
matured or unmatured, whether disputed or undisputed,  arising prior to the
effective date of this Agreement and arising from and/or related in any way to  the Litigation and/or the
Arbitration, and specifically including but not limited to any and all claims,
counterclaims and demands that were actually brought and/or could have been
brought in the Litigation and/or the Arbitration.  This Legends Plaintiffs’ release, acquittal
and discharge of the GTA Defendants shall be effective upon the effective date
of this Agreement, and shall not be set aside or challenged by the Legends
Plaintiffs for any reason, and shall survive expiration, termination, and/or
any breach of this Agreement.   This
Legends Plaintiffs’ release, acquittal and discharge of the GTA Defendants
shall not release, acquit, discharge, or in any way limit or otherwise affect
the GTA Defendants’ or the Legends Plaintiffs’ duties and obligations under
this Agreement.

 

3.   RELEASE OF LEGENDS PLAINTIFFS. 
In further consideration of this Agreement, the GTA Defendants do hereby
for themselves, and each of their successors, assigns, predecessors in 

 

6

 

interest, affiliates,
trustees, representatives, insurers, attorneys, agents and employees, fully and
irrevocably release, acquit and forever discharge the Legends Plaintiffs and
each of their successors, assigns, predecessors in interest, affiliates,
trustees, representatives, insurers, attorneys, agents and employees, of and
from any and all claims, actions, causes of actions, controversies, disputes,
demands, rights, damages, costs, fees, attorneys’ fees, counterclaims,
injuries, expenses, suits at law or in equity, consequential damages, whether
personal, property, economic or non-economic, of every nature in kind
whatsoever, whether at law or in equity, whether at common law or pursuant to
federal, state or local statutes, ordinances or regulations, whether vested or
contingent, whether now known or unknown, whether foreseen or unforeseen,
whether liquidated or unliquidated, whether matured or unmatured, whether
disputed or undisputed,  arising prior to the effective date of this
Agreement and arising from and/or related in any way to  the Litigation and/or the
Arbitration, and specifically including but not limited to any and all claims,
counterclaims and demands that were actually brought and/or could have been
brought in the Litigation and/or the Arbitration.  This GTA Defendants’ release, acquittal and
discharge of the Legends Plaintiffs shall be effective upon the effective date
of this Agreement, and shall not be set aside or challenged by the GTA
Defendants for any reason, and shall survive expiration, termination, and/or
any breach of this Agreement.   This GTA
Defendants’ release, acquittal and discharge of the Legends Plaintiffs shall
not release, acquit, discharge, or in any way limit or otherwise affect the GTA
Defendants’ or the Legends Plaintiffs’ duties and obligations under this
Agreement.

 

4.   LARRY D. YOUNG’S MONEY PAYMENTS TO GTA.  In further consideration for the GTA
Defendants entering into this Agreement, Larry D. Young agrees to pay to GTA
the money sums set forth in the Promissory
Note, executed simultaneously herewith, and attached hereto and 

 

7

 

incorporated herein by
reference as Exhibit A.  Time is of the essence as to all money
payments required to be paid by Larry D. Young pursuant to the Promissory Note.

 

5.   CONFESSION OF JUDGMENT.  As
collateral for, and as further evidence of, Larry D. Young’s agreement and
obligation to pay to GTA the money sums set forth above, Larry D. Young agrees
to the Confession of Judgment, executed
simultaneously herewith, and attached hereto and incorporated herein by
reference as Exhibit B.

 

6.   LARRY D. YOUNG’S PROPERTY TRANSFER TO GTA.  In further consideration for the GTA
Defendants entering into this Agreement, Larry D. Young agrees to make the
following real property transfer to GTA, by and through his limited
partnership, Harrietta Plantation, Ltd., for no additional consideration paid
by GTA, by limited warranty deed in fee simple with good, valid and marketable
title, free and clear of any liens, mortgages, easements, conditions,
assessments, restrictions, agreements, encumbrances or title defects of any
kind (excepting 2008 ad valorem property taxes, which shall be pro-rated as of
the date of transfer, and further excepting such utility easements, such
portions of the Property within the bounds of public rights-of-way, and such
other matters which were recorded in the public record as of October 28,
1993), not earlier than forty-five (45) days after of the effective date of
this Agreement:  All rights, title and
interest in and to that tract of land, and all improvements thereon, consisting
of approximately 118.67 acres, located on or near South Santee Road in
Charleston County, South Carolina, being the remainder of a 138.26 acre tract
known as Tract 2 in Deed Book Y233-037 and Plat Book BA-85 in the Charleston
County RMC Office, and more fully described and designated as Charleston County
Tax Map Number 802-00-00-158, as shown on Exhibit C attached hereto
and incorporated herein by reference (the “Property”).  GTA shall have the right, in its sole discretion,
to refuse the transfer of said Property for any or no reason. Such a refusal on
the part of GTA shall not void or adversely affect the remaining provisions 

 

8

 

of this Agreement nor shall GTA be entitled
to any substitute transfer, conveyance or payment should it refuse to accept
the Property; however, should such GTA refusal be based upon a breach of one or
more of the warranties and representations set forth in Section 7, then
Larry D. Young shall not be entitled to any credit for the value of the
Property in the Confession of Judgment. 
The date of closing to transfer the Property shall be on the sixtieth
(60th) day after the effective date of this Agreement, unless GTA
shall determine a different date of the transfer of the Property, in its sole
discretion, by providing written notice of GTA’s demand to close to Larry D.
Young at least two (2) days in advance. 
Larry D. Young shall bear all of the costs of transferring the said
Property to GTA, except the customary pro rata share of 2008 ad valorem
property taxes and GTA’s attorney expenses. 
Larry D. Young shall be responsible for the payment of any roll-back
taxes, if any, relating to the transfer of the Property.  Commencing
upon the effective date of this Agreement and continuing until the time of
transfer of the Property, GTA and its agents shall have the right to
review and inspect the Property.  GTA
agrees to indemnify and hold harmless Larry D. Young and Harrietta Plantation,
Ltd. for claims, injuries or damages arising from or connected with GTA’s
exercise of the foregoing Property inspection rights.

 

7.          LARRY D. YOUNG’S
WARRANTIES, REPRESENTATIONS AND PROMISES TO GTA AS TO THE PROPERTY TRANSFER TO
GTA.  In further consideration for the GTA
Defendants entering into this Agreement, Larry D. Young makes the following
material warranties, representations and promises regarding the transfer to GTA
of the Harrietta Plantation, Ltd. Property, all of which shall survive the
transfer of the Property to GTA:

 

a)         That Larry D.
Young has the authority to act on behalf of Harrietta Plantation, Ltd. to
authorize and bind the said limited partnership to the terms of this Agreement;

 

9

 

b)        That Harrietta
Plantation, Ltd. has good, valid and marketable fee simple title to the
Property, free and clear of any liens, mortgages, easements, conditions,
assessments, restrictions, agreements, claims, encumbrances or title defects of
any kind (excepting 2008 ad valorem property taxes, which shall be pro-rated as
of the date of transfer, and further excepting such utility easements, such
portions of the Property within the bounds of public rights-of-way, and such
other matters which were recorded in the public record as of October 28,
1993);

 

c)         That,
to Larry D. Young’s present belief and personal knowledge, without
investigation,

 

(i) the Property does not contain any
hazardous wastes, hazardous substances, toxic substances, hazardous air
pollutants, or toxic pollutants, as those terms are used or defined in any
Environmental Law.  As used in this
Agreement, the term “Environmental Law” shall mean and refer to any one or more
of the Comprehensive Environmental Response, Compensation and Liability Act
(CERCLA), 42 U.S.C. §§ 9601 et seq.; the Resource Conservation and Recovery Act
(RCRA), 42 U.S.C. §§ 6901 et seq.; the Toxic Substances Control Act (TSCA), 15
U.S.C. §§ 2601 et seq.; the Federal Water Pollution Control Act (the Clean
Water Act), 33 U.S.C. §§ 1251 et seq.; the Clean Air Act, 42 U.S.C. §§ 7401 et
seq.; the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. §§ 136
et seq.; the Clean Air Act (42 U.S.C.A. §§ 7401 et seq.); any amendments
thereto; any guidance documents and/or regulations promulgated now or hereafter
adopted, published, or promulgated pursuant thereto; or any other federal,
state, or local law, regulation, rule, or ordinance that pertains to hazardous
materials at, in, on, under or about the Property;

 

10

 

(ii) no part of the Property is
currently subject to any federal, state, or local compliance or enforcement
action, cleanup action, or other action because of the presence of stored,
leaked, spilled or disposed petroleum products, waste materials or debris,
PCBs, underground storage tanks, asbestos, or any hazardous substances, toxic
substances, hazardous air pollutants, or toxic pollutants as defined or
regulated by any Environmental Law;

 

(iii) no part of the Property has been
filled with rock, soil, gravel, debris, garbage, stumps or other fill
materials; no condition currently exists on the Property which is or may be
characterized by any federal, state or local government or agency as an actual
or potential threat of danger to the public health or environment;

 

d)        That the
Property has full, unrestricted ingress and egress access rights to Seven Mile
Road in the County of Charleston, State of South Carolina;

 

e)         That Harrietta
Plantation, Ltd. has not entered into any agreement to lease, sell or otherwise
transfer or dispose of the Property, or any part thereof, which would violate
the terms of this Agreement;

 

f)           That the use
and condition of the Property shall not materially change between the effective
date of this Agreement and the date of transfer of the Property to GTA;

 

g)        That there is
no litigation or legal proceedings involving the Property or Harrietta
Plantation, Ltd. which affects the title to the Property or Harrietta
Plantation, Ltd.’s ability to transfer the Property to GTA as contemplated in
this Agreement;

 

11

 

h)        That Larry D.
Young and Harrietta Plantations, Ltd. shall execute a sworn affidavit at
closing stating that Larry D. Young’s representations and warranties set forth in
this Agreement are, to the best of their knowledge and belief, true and correct
in all material respects as of the effective date of this Agreement and as of
the date of transfer of the Property to GTA;

 

i)            That Larry D.
Young and Harrietta Plantation, Ltd. shall execute and deliver such other documents as GTA and/or its attorney
may reasonably request in order to close
this transaction and reasonably effectuate the terms of this Agreement,
including, but not limited to, 
corrective documents, a Non-Foreign Transferor Affidavit, a South
Carolina Residency Affidavit, a closing statement, and sworn affidavits from
Larry D. Young and Harrietta Plantation, Ltd. attesting that: (i) no
individual or entity (except as to work performed at the direction of GTA) has
any claim against any portion of the Property under the applicable construction
lien law; (ii) no individual or entity is either in possession of the
Property or has a possessory interest or claim in the Property; and (iii) no
improvements to the Property have been made 
for which payment has not been made, and containing information
necessary to enable GTA’s title company to delete exceptions to the title
commitment for matters appearing during GTA’s inspection period, including, but
not limited to, matters involving parties in possession and boundary disputes.

 

8.   SATISFACTION OF JUDGMENT. 
Within ten (10) days of the effective date of this Agreement, the
GTA Defendants will file a written notice of satisfaction of the Court’s
Judgment, filed on August 10, 2007, with the Clerk of Court.

 

9.   JOINT MOTION.  Within ten (10) days
of the effective date of this Agreement, the Parties shall execute and file a
joint motion to withdraw as moot all pending motions, including, but 

 

12

 

not limited to, the Legends
Plaintiffs’ pending Rule 59 motion and the GTA Defendants’ pending Rule 54
motion for attorney’s fees, costs and expenses.

 

10. WAIVER OF APPEAL.  In further
consideration for the GTA Defendants entering into this Agreement, the Legends
Plaintiffs knowingly, voluntarily, intentionally and unconditionally waive,
forego, forfeit, relinquish and abandon any and all rights to appeal the
Judgment and/or any other orders in this action or arising from or related to the
Litigation, excepting any orders arising from the Court’s enforcement or
interpretation of this Agreement.

 

11. CONTINUING OBLIGATIONS. 
Nothing in this Agreement is meant to, or shall, limit or eliminate the
continuance of any of the Parties’ prior existing fiduciary or contractual
obligations, including, but not limited to, those arising under confidentiality
agreements, after the date of this Agreement.

 

12. COURT CONSENT AND RETENTION OF JURISDICTION.  The Parties agree among themselves and intend
that the Court shall approve this Agreement and shall retain jurisdiction over
the enforcement of the provisions of this Agreement, and the Parties
irrevocably waive the right to a jury trial for any dispute, matter or claim
arising under or related to this Agreement. 
By approving this Agreement, the Court shall retain jurisdiction over
the enforcement of this Agreement.

 

13. INDEMNIFICATION.  In further
consideration of this Agreement, Larry D. Young hereby agrees to indemnify,
defend and hold harmless any and/or all of the GTA Defendants for any
liabilities, costs and/or expenses (including, without limitation, reasonable
legal fees and expenses) incurred in connection with any claim by BDO Seidman,
LLP, Fred Walton, Kurt Huntzinger or Chris Truitt against the GTA Defendants
relating to the Litigation or the Arbitration.

 

13

 

14. NO PRIOR ASSIGNMENT.  Except
as expressly set forth in this Agreement, the Parties covenant and agree that
each has not assigned, transferred or conveyed in any manner all or any part of
their legal claims or legal rights in connection with the matters set forth in
this Agreement.

 

15. ENTIRE AGREEMENT.  No promise,
representation, warranty, stipulation, release, covenant or agreement other
than those expressly set forth in this Agreement has been made as consideration
for this Agreement, and the Parties enter into this Agreement for the sole
consideration recited herein.  The
Agreement constitutes the entire agreement and understanding of the Parties and
supercedes all prior proposals, negotiations, understandings, representations
and agreements relating to its subject matter.

 

16. COUNTERPARTS.  This Agreement
may be executed in two or more identical counterparts, all of which shall contain
but one and the same agreement, provided that in making proof of this
Agreement, it shall not be necessary to produce or account for more than one
such fully-executed counterpart.  Any
signature attestation required by this Agreement may be transmitted via
telecopier, and signature and attestations so transmitted shall be as binding
as the original.

 

17. SUCCESSORS IN INTEREST.  This
Agreement is binding upon, and shall inure to the benefit of, the Parties
hereto and their respective heirs, predecessors, successors, assigns,
affiliates, agents, insurers, employees, legal representatives, and any other
persons or entities acting on their behalf or claiming through or under them or
any of them, PROVIDED, HOWEVER, that in the event that any of the Legends
Plaintiffs assign this Agreement or any part hereof to any third party, any of
such Legends Plaintiffs shall remain fully and primarily liable for all of
their duties and obligations under this Agreement.

 

18. FULL AUTHORITY.  The
signatories on behalf of, as the case may be, themselves or the entities for
which they execute this Agreement, and to thereby bind said entity, represent
that they 

 

14

 

have full and complete
authority to enter into this Agreement, and are competent and of the age of
majority.

 

19. FEES AND COSTS.  The Parties
agree that they shall pay their own costs and attorney’s fees associated with
the negotiation, drafting and filing of this Agreement.

 

20. DEFAULT AND EXPENSE OF ENFORCEMENT ACTION.  A violation or breach of this Agreement shall
be a default.  In the event that Larry D.
Young shall breach, or otherwise be in default of, Sections 6 and 7 of this
Agreement, and said default cannot be cured within a reasonable period of time,
not to exceed ninety (90) days, then GTA shall be entitled to the sum of
$700,000.00 (Seven Hundred Thousand U.S. Dollar) to be paid by Larry D. Young
as follows:

 

(a)           $166,666.67 (One Hundred Sixty-Six Thousand Six Hundred
Sixty-Six and 67/100 U.S. Dollars) due on January 1, 2009;

 

(b)           $166,666.66 (One Hundred Sixty-Six Thousand Six Hundred
Sixty-Six and 66/100 U.S. Dollars) due on January 1, 2010;

 

(c)           $166,666.66 (One Hundred Sixty-Six Thousand Six Hundred
Sixty-Six and 66/100 U.S. Dollars) due on January 1, 2011; and,

 

(d)           $200,000.00 (Two Hundred Thousand U.S. Dollars) due on June 1,
2011.

 

 In the event that any of the Legends
Plaintiffs shall breach, or otherwise be in default of, this Agreement other
than Sections 6 and 7, then the GTA Defendants’ sole and exclusive remedy shall
be specific enforcement of this Agreement with respect to such Sections other
than Sections 6 and 7.  In the event that
any of the GTA Defendants shall breach, or otherwise be in default of, this
Agreement, then the Legends Plaintiffs’ sole and exclusive remedy shall be
specific enforcement of this Agreement. 
If any of the Parties incurs any expense, including reasonable attorneys’
fees, in connection with any action or proceeding, including without limitation
one seeking declaratory relief, 

 

15

 

instituted by any Party for reason of any
default or alleged default of another Party under this Agreement, the Party
prevailing in such action or proceeding shall be entitled to recover such
expenses and attorneys’ fees from the opposing party.

 

21. TERMS READ AND UNDERSTOOD. 
Each Party hereto represents that it or he has carefully read and fully
understands the terms, conditions, meaning and intent of this Agreement, and
that it or he has had an opportunity to discuss the terms, conditions and
provisions with legal counsel prior to the execution hereof.  Each Party specifically hereby acknowledges
receipt of a copy of this Agreement before signing it and understands that each
and every provision of this Agreement is legally binding.

 

22. GOVERNING LAW AND CONSTRUCTION. 
This Agreement shall be deemed to be a contract made under, and for all
purposes shall be governed by and construed in accordance with, the laws of the
State of South Carolina.  This Agreement
shall not be construed in favor or against a Party to this Agreement due to the
draftsmanship of this Agreement, it being stipulated that the Parties jointly
and equally contributed to the drafting of this Agreement.

 

23. HEADINGS.  The headings of
this Agreement are for convenience or reference only, and shall not limit,
expand, modify or otherwise affect the meaning hereof.

 

24. AMENDMENTS TO BE IN WRITING. 
The terms of this Agreement may not be changed, modified, waived,
discharged or terminated in any manner, except by written instrument signed by
all of the Parties.

 

IN WITNESS WHEREOF, the Parties
have executed this Agreement under seal effective as of the date first written
above.

 

[SIGNATURES
CONTAINED ON FOLLOWING PAGES]

 

16

 

With the Approval of the Court, which hereby
retains jurisdiction over the enforcement of this Agreement:

 

 

	
   

  	
   

  	
   

  
	
   

  	
  Terry L. Wooten

  
	
   

  	
  United States District Judge

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
                                                        

  	
   ,
  2008

  	
   

  
					

 

 

	
  Respectfully submitted,

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Joseph P. Griffith, Jr.

  	
   

  	
  /s/ Doug Smith

  	
   

  
	
  Joseph P. Griffith, Jr. (Federal Id.
  #2473)

  	
  Doug Smith (Federal Id. #4212)

  
	
  JOE GRIFFITH LAW FIRM, LLC

  	
  JOHNSON, SMITH, HIBBARD &

  
	
  7 State Street

  	
  WILDMAN LAW FIRM, LLP

  
	
  Charleston, SC 29401

  	
  220 North Church St., Suite 4 (29306)

  
	
  (843) 225-5563 (Telephone)

  	
  P.O. Drawer 5587

  
	
  (843) 722-6254 (Facsimile)

  	
  Spartanburg, South Carolina 29304

  
	
  Attorney for GTA Defendants

  	
  Telephone: 864-582-8121

  
	
   

  	
  Facisimile: 864-585-5328

  
	
   

  	
  Attorney for Plaintiffs

  
				

 

17

 

	
   

  	
  /s/ Larry D. Young

  	
   

  
	
   

  	
  Larry D.
  Young

  

 

STATE OF SOUTH CAROLINA

 

COUNTY OF Georgetown

 

I, Larry Woodberry, a Notary Public of the County and State
aforesaid, do hereby certify that Larry D. Young personally appeared before me
this day and acknowledged the due execution of the foregoing instrument.

 

Witness my hand and official stamp or seal, this the 21st day of
January, 2008.

 

	
  /s/ Larry B. Woodberry

  	
   

  
	
  Notary Public

  
	
  My Commission Expires: 

  	
  8/31/2010

  	
   

  
	
  (OFFICIAL SEAL)

  
				

 

18

 

	
   

  	
  /s/Danny L. Young

  	
   

  
	
   

  	
  Danny L.
  Young

  

 

STATE OF SOUTH CAROLINA

 

COUNTY OF Georgetown

 

I, Larry Woodberry, a Notary Public of the County and State
aforesaid, do hereby certify that Larry D. Young personally appeared before me
this day and acknowledged the due execution of the foregoing instrument.

 

Witness my hand and official stamp or seal, this the 21st day of
January, 2008.

 

	
  /s/ Larry B. Woodberry

  	
   

  
	
  Notary Public

  
	
  My Commission Expires: 

  	
  8/31/2010

  	
   

  
	
  (OFFICIAL SEAL)

  
				

 

19

 

	
   

  	
  /s/Kyle N. Young

  	
   

  
	
   

  	
  Kyle N. Young

  

 

STATE OF SOUTH CAROLINA

 

COUNTY OF Georgetown

 

I, Larry Woodberry, a Notary Public of the County and State
aforesaid, do hereby certify that Larry D. Young personally appeared before me
this day and acknowledged the due execution of the foregoing instrument.

 

Witness my hand and official stamp or seal, this the 21st day of
January, 2008.

 

	
  /s/ Larry B. Woodberry

  	
   

  
	
  Notary Public

  
	
  My Commission Expires: 

  	
  8/31/2010

  	
   

  
	
  (OFFICIAL SEAL)

  
				

 

20

 

	
   

  	
  THE YOUNG FAMILY IRREVOCABLE TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John F. Smith, III, 

  	
   As Trustee

  
					

 

STATE OF SOUTH CAROLINA

 

COUNTY OF Georgetown

 

I, Larry Woodberry, a Notary Public of the County and State
aforesaid, do hereby certify that Larry D. Young personally appeared before me
this day and acknowledged the due execution of the foregoing instrument.

 

Witness my hand and official stamp or seal, this the 21st day of
January, 2008.

 

	
  /s/ Larry B. Woodberry

  	
   

  
	
  Notary Public

  
	
  My Commission Expires: 

  	
  8/31/2010

  	
   

  
	
  (OFFICIAL SEAL)

  
				

 

21

 

	
   

  	
  THE LEGENDS GROUP, LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/Larry D. Young

  	
   

  
	
   

  	
  Larry D. Young, President

  

 

STATE OF SOUTH CAROLINA

 

COUNTY OF Georgetown

 

I, Larry Woodberry, a Notary Public of the County and State
aforesaid, do hereby certify that Larry D. Young personally appeared before me
this day and acknowledged the due execution of the foregoing instrument.

 

Witness my hand and official stamp or seal, this the 21st day of
January, 2008.

 

	
  /s/ Larry B. Woodberry

  	
   

  
	
  Notary Public

  
	
  My Commission Expires: 

  	
  8/31/2010

  	
   

  
	
  (OFFICIAL SEAL)

  
				

 

22

 

	
   

  	
  GOLF TRUST OF AMERICA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael C. Pearce

  	
   

  
	
   

  	
  Michael C. Pearce, President

  
				

 

STATE OF NORTH CAROLINA

 

COUNTY OF ORANGE

 

I, Roger W. Heflin, a Notary Public of the County and State
aforesaid, do hereby certify that Michael C. Pearce personally appeared before
me this day and acknowledged the due execution of the foregoing instrument.

 

Witness my hand and official stamp or seal, this the 21st day of
January, 2008.

 

	
  /s/ Roger W. Heflin

  	
   

  
	
  Notary Public

  
	
  My Commission Expires: 

  	
  October 12, 2010

  	
   

  
	
  (OFFICIAL SEAL)

  
				

 

23

 

	
   

  	
  /s/ W. Bradley Blair, II

  	
   

  
	
   

  	
  W. Bradley Blair, II

  

 

STATE OF SOUTH CAROLINA

 

COUNTY OF Charleston

 

I, Lorraine McKenna, a Notary Public of the County and State
aforesaid, do hereby certify that W. Bradley Blair, II personally appeared
before me this day and acknowledged the due execution of the foregoing
instrument.

 

Witness my hand and official stamp or seal, this the 21st day of
January, 2008.

 

	
  /s/ Lorraine McKenna

  	
   

  
	
  Notary Public

  
	
  My Commission Expires: 

  	
  7/29/2012

  	
   

  
	
  (OFFICIAL SEAL)

  
				

 

24

 

ACKNOWLEDGEMENT

 

	
   

  	
  /s/ Scott D. Peters

  	
   

  
	
   

  	
  SCOTT D. PETERS

  

 

	
  STATE OF CALIFORNIA

  	
  )

  
	
   

  	
  )SS

  
	
  COUNTY OF ORANGE

  	
  )

  

 

On January 29, 2008, before me, Kristen B. Mullins, Notary Public,
personally appeared Scott D. Peters, before me this day and acknowledged
to me that he executed the same in his authorized capacity and that by his
signature of the instrument the person, or entity upon behalf of which the
person acted, executed the instrument.

 

WITNESS my hand and official seal

 

	
  /s/Kristen B. Mullins

  	
   

  
	
  Signature of Notary

  
	
   

  
	
   

  
	
  My Commission Expires: 

  	
  May 7, 2009

  	
   

  
	
  (OFFICIAL SEAL)

  
				

 

25

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