EXHIBIT 2.1
EXECUTION COPY
KSL RECREATION CORPORATION
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STOCK PURCHASE AGREEMENT
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Dated as of February 12, 2004
by and among
KKR PARTNERS II, L.P.,
KKR 1996 FUND, L.P.,
RESORT ASSOCIATES, L.P., and
GOLF ASSOCIATES, L.P.
as Sellers
and
CNL RESORT ACQUISITION CORP.
as Purchaser
and
KSL RECREATION CORPORATION
Table of Contents
Page
ARTICLE I. PURCHASE AND SALE OF THE SHARES..............................................2
1.01 Delivery and Purchase of Shares..............................................2
1.02 Consideration for Shares.....................................................2
1.03 Deposit......................................................................9
1.04 Treatment of Options........................................................10
ARTICLE II. CLOSING.....................................................................11
2.01 Date of Closing.............................................................11
2.02 Deliveries..................................................................11
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND OF SELLERS.....................................................................11
3.01 Capitalization of the Company and Title to Shares...........................11
3.02 Subsidiaries................................................................12
3.03 Authorization of Agreement..................................................13
3.04 No Conflicts................................................................14
3.05 No Consents.................................................................15
3.06 Compliance with Laws........................................................15
3.07 Litigation..................................................................16
3.08 No Brokers..................................................................16
3.09 Organization and Authority..................................................17
3.10 Financial Statements........................................................17
3.11 Undisclosed Liabilities.....................................................18
3.12 Intellectual Property.......................................................18
3.13 Contracts and Commitments...................................................19
3.14 Employee Benefits...........................................................20
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3.15 Absence of Certain Changes..................................................23
3.16 Taxes.......................................................................25
3.17 Transactions with Affiliates................................................26
3.18 Insurance...................................................................26
3.19 Environmental Matters.......................................................27
3.20 Real Estate.................................................................28
3.21 Xxxx-Xxxxx-Xxxxxx Act.......................................................32
3.22 Labor Relations; Compliance.................................................32
3.23 Questionable Payments.......................................................33
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER.................................34
4.01 Organization of Purchaser...................................................34
4.02 Authorization of Agreement..................................................34
4.03 No Conflicts................................................................34
4.04 No Consents.................................................................35
4.05 Litigation..................................................................35
4.06 No Brokers..................................................................35
4.07 Investment Purpose..........................................................35
4.08 Purchaser's Examination.....................................................35
4.09 Financial Ability...........................................................36
ARTICLE V. FURTHER AGREEMENTS OF THE PARTIES...........................................36
5.01 Payments and Release of Holdback Amounts....................................36
5.02 Liabilities.................................................................40
5.03 Expenses....................................................................43
5.04 Resignations................................................................44
5.05 Interim Management Agreement................................................44
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5.06 Real Estate.................................................................44
5.07 Further Assurances..........................................................48
5.08 Correspondence..............................................................49
5.09 Record Retention............................................................49
5.10 Regulatory and Other Authorizations.........................................49
5.11 Conduct of Business Pending the Closing.....................................50
5.12 No Disclosure...............................................................53
5.13 Transfer Taxes..............................................................54
5.14 Reasonable Efforts to Close.................................................54
5.15 Access to the Company and its Subsidiaries..................................54
5.16 Section 280G of the Code....................................................55
5.17 Financing...................................................................56
5.18 Non-Competition Agreement...................................................56
5.19 Guest Data and Database.....................................................56
5.20 Employee Hiring Assistance..................................................57
5.21 Transfer of Blue View II LLC................................................57
5.22 La Quinta Declarations......................................................57
ARTICLE VI. CONDITIONS TO CLOSING.......................................................58
6.01 Conditions to Closing.......................................................58
6.02 Documents to be Delivered by Sellers and the Company........................59
6.03 Documents to be Delivered by Purchaser......................................60
ARTICLE VII. TERMINATION.................................................................61
7.01 Termination.................................................................61
7.02 Effect of Termination.......................................................62
ARTICLE VIII.MISCELLANEOUS...............................................................62
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8.01 Nonsurvival of Representations, Warranties and Certain Covenants............62
8.02 Entire Agreement............................................................63
8.03 Governing Law; Jurisdiction; Waiver of Jury Trial...........................64
8.04 Amendment; Waiver...........................................................65
8.05 Notices.....................................................................65
8.06 Severability................................................................67
8.07 Assignment and Binding Effect...............................................67
8.08 No Benefit to Others........................................................67
8.09 No Recourse.................................................................67
8.10 Enforcement.................................................................67
8.11 Specific Performance........................................................68
8.12 Counterparts................................................................68
8.13 Interpretation..............................................................68
8.14 Disclosure..................................................................69
8.15 No Presumption..............................................................69
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SCHEDULES
Schedule 1.02(a)(xii) Reference Working Capital Amount
Schedule 1.02(c)(i) Purchase Price Adjustment
Schedule 3.01(a) Capitalization/Management Stockholders
Schedule 3.01(b) Company Stock Options
Schedule 3.02 Subsidiaries
Schedule 3.04 Conflicts
Schedule 3.06 Compliance with Laws
Schedule 3.07 Litigation
Schedule 3.10(a)(i) Financial Statements (Audited)
Schedule 3.10(a)(ii) Financial Statements (Unaudited)
Schedule 3.11 Undisclosed Liabilities
Schedule 3.12 Intellectual Property
Schedule 3.13(a) Contracts and Commitments
Schedule 3.14(a) Employee Benefit Plans
Schedule 3.14(e) Summary of Employee Benefit Plan Information - To Be Provided
Schedule 3.15 Absence of Changes
Schedule 3.16(a) Taxes
Schedule 3.17 Transactions with Affiliates
Schedule 3.18 Insurance
Schedule 3.19 Environmental Matters
Schedule 3.20(b) Condemnation Proceedings
Schedule 3.20(d) Real Property Contracts
Schedule 3.20(e) Space Leases
Schedule 3.20(g) Forms of Membership Documents
Schedule 3.20(i) Personal Property
Schedule 3.20(j) Artwork
Schedule 3.20(k)(v) Existing Surveys
Schedule 3.20(k)(vi) Leased Real Property
Schedule 3.20(k)(viii) Owned Real Property
Schedule 3.22 Labor Relations
Schedule 5.11(a) Conduct of Business
Schedule 5.11(c) Agreements or Arrangements Requiring Purchaser Consent
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STOCK PURCHASE AGREEMENT
AGREEMENT, dated as of February __, 2004 (this "Agreement"), among KKR
Partners II, L.P., a Delaware limited partnership ("KKR II"), KKR 1996 Fund,
L.P., a Delaware limited partnership ("1996 Fund"), Resort Associates, L.P., a
Delaware limited partnership ("RA"), and Golf Associates, L.P. ("GA"), a
Delaware limited partnership (KKR II, 1996 Fund, RA and GA being collectively
referred to herein as "Sellers" and each a "Seller"), CNL Resort Acquisition
Corp., a Delaware corporation ("Purchaser"), and KSL Recreation Corporation, a
Delaware corporation (the "Company").
WHEREAS, KKR II owns and shall own as of the Closing Date (as defined
below) 9,562 shares (the "KKR II Shares") of the issued and outstanding shares
of common stock, par value $.01 per share of the Company (the "Company Common
Stock"), representing approximately 1.71% of the issued and outstanding shares
of Company Common Stock; and
WHEREAS, 1996 Fund owns and shall own as of the Closing Date 81,320 shares
(the "1996 Fund Shares") of Company Common Stock, representing approximately
14.62% of the issued and outstanding shares of Company Common Stock; and
WHEREAS, RA owns and shall own as of the Closing Date 393,167 shares (the
"RA Shares") of Company Common Stock, representing approximately 70.68% of the
issued and outstanding shares of Company Common Stock; and
WHEREAS, GA owns and shall own as of the Closing Date 55,960 shares (the
"GA Shares" and, together with the KKR II Shares, the 1996 Fund Shares and the
RA Shares, the "Seller Shares") of Company Common Stock, representing
approximately 10.06% of the issued and outstanding shares of Company Common
Stock; and
WHEREAS, the persons named on Schedule 3.01(a) attached hereto
(collectively, the "Management Stockholders" and each a "Management
Stockholder") own as of the date hereof 16,276 shares of Company Common Stock
(including restricted shares), representing approximately 2.93% of the issued
and outstanding shares of Company Common Stock (the shares held by the
Management Stockholders on the Closing Date, the "Management Shares" and,
together with Seller Shares, the "Shares");
WHEREAS, the Shares constitute 100% of the issued and outstanding shares of
capital stock of the Company as of the date hereof, and
WHEREAS, Purchaser desires to purchase all of the outstanding capital stock
of the Company owned by Sellers and the Management Stockholders, on the terms
and conditions set forth herein.
NOW, THEREFORE in consideration of the mutual covenants and the respective
representations and warranties contained herein, the parties hereby agree as
follows:
ARTICLE I. PURCHASE AND SALE OF THE SHARES.
1.01 Delivery and Purchase of Shares. Upon the terms and subject to
the conditions of this Agreement, on the Closing Date (as defined below), (i)
each of Sellers will sell, convey, assign and transfer to Purchaser or its
designee certificates evidencing the Seller Shares, and (ii) Purchaser shall
acquire from the Management Stockholders the Management Shares, to the extent
such Management Shares have been delivered to the Escrow Agent (as defined
below) in accordance with Section 5.01; provided that Purchaser shall not be
obligated to purchase any Management Shares that are not delivered by the holder
thereof free of any Liens (as defined below) (except Liens arising as a result
of an act on the part of Purchaser). Such certificates evidencing the Company
Common Stock shall be duly endorsed in blank, or be accompanied by appropriate
stock transfer powers duly executed in blank, with all necessary stock transfer
tax stamps affixed and canceled.
1.02 Consideration for Shares. (a) Definitions. For purposes of this
Agreement, the terms below shall have the following respective meanings:
(i)"1996 Fund Holdback Amount" shall mean the amount equal to
four percent (4%) of the product of (A) an amount equal to the number of 1996
Fund Shares divided by the Share Number, multiplied by (B) the Base Purchase
Price.
(ii)"Base Purchase Price" shall mean One Billion Three Hundred
Sixty-Six Million Dollars ($1,366,000,000), as adjusted pursuant to Section
1.02(c)(i) and as credited for the Transaction Fees and any liabilities of the
Company or its Subsidiaries, whether absolute, accrued, contingent or otherwise,
payable after the Closing in connection with the "Key Employee Retention Plan"
and the "Deferred Cash Bonus Plan" (relating solely to the payments
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due on January 1, 2005) described on Schedule 3.11 hereof unless, in either
case, already included in current liabilities under Section 1.02(c)(i).
(iii)"Capital Stock Subaccount" shall mean with respect to each
Seller, one half of its holdback amount in connection with the indemnity
obligations under Section 5.02(d).
(iv)"Closing Date" shall mean April 2, 2004, unless otherwise
extended by the parties hereto; provided that if a temporary injunction or other
temporary or preliminary order of a Governmental Authority (as defined below)
preventing the consummation of the transactions contemplated hereby is in
effect, the term Closing Date shall mean May 3, 2004, unless otherwise extended
by the parties hereto.
(v)"Final Purchase Price" shall mean the Base Purchase Price as
adjusted pursuant to Section 1.02(c)(ii).
(vi)"GA Holdback Amount" shall mean the amount equal to four
percent (4%) of the product of (A) an amount equal to the number of GA Shares
divided by the Share Number, multiplied by (B) the Base Purchase Price.
(vii)"KKR II Holdback Amount" shall mean the amount equal to
four percent (4%) of the product of (A) an amount equal to the number of KKR II
Shares divided by the Share Number, multiplied by (B) the Base Purchase Price.
(viii)"Management Holdback Amount" shall mean the amount equal
to (A) two percent (2%) of the product of (1) an amount equal to the number of
Management Shares divided by the Share Number, multiplied by (2) the Base
Purchase Price; plus (B) the number of Management Shares which are not
transferred at Closing free and clear of all Liens (other than Liens arising as
a result of any act on the part of Purchaser) multiplied by an amount equal to
ninety-eight percent (98%) of the Base Purchase Price Per Share.
(ix)"Optionholders Holdback Amount" shall mean the amount equal
to (A) two percent (2%) of the product of (1) an amount equal to the number of
shares of Company Common Stock subject to Company Stock Options divided by the
Share Number, multiplied by (2) the Base Purchase Price; plus (B) with respect
to shares of Company Common Stock subject to Company Stock Options issued and
outstanding on the Closing Date for which the condition set forth in Section
1.04(c) is not satisfied at the Closing, (1) the excess, if any, of the Base
Purchase Price Per Share over the exercise price per share of each such Company
Stock Option,
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minus (2) the portion of the holdback amount described in clause (A) of this
Section 1.02(a)(ix) applicable to the Company Option Shares for which the
condition set forth in Section 1.04(c) is not satisfied at the Closing.
(x)"Percentage Share" means, (A) with respect to each Seller and
Management Stockholder, a percentage equal to the quotient of (1) the total
number of shares of Company Common Stock owned by such person immediately prior
to the Closing, divided by (2) the Share Number, and (B) with respect to each
Optionholder, a percentage equal to the quotient of (1) the total number of
shares of Company Common Stock subject to Company Stock Options owned by such
person immediately prior to the Closing, divided by (2) the Share Number.
(xi)"RA Holdback Amount" shall mean the amount equal to four
percent (4%) of the product of (A) an amount equal to the number of RA Shares
divided by the Share Number, multiplied by (B) the Base Purchase Price.
(xii)"Reference Working Capital Amount" means current assets
determined in accordance with GAAP and as set forth on Schedule 1.02(a)(xii)
(excluding cash, restricted cash, income taxes receivable and deposit for
potential acquisition as of December 31, 2003) minus current liabilities
determined in accordance with GAAP and as set forth on Schedule 1.02(a)(xii)
(excluding current portions of obligations under capital leases, accrued
corporate wages and deferred bonuses to be paid at closing, and payable to
affiliates). For purposes of Section 1.02(c)(i), the "Reference Working Capital
Amount" shall be a net liability of Twenty-Three Million Two Hundred Forty-Nine
Thousand Dollars ($23,249,000).
(xiii)"Share Number" means the sum of (A) the number of shares
of Company Common Stock issued and outstanding immediately prior to the Closing
plus (B) the number of shares of Company Common Stock subject to Company Stock
Options issued and outstanding immediately prior to the Closing.
(xiv)"Working Capital Subaccount" shall mean (X) with respect to
each Seller, one-half of its holdback amount, (Y) with respect to each
Management Stockholder, the portion of its holdback amount described in clause
(A) of the definition of Management Holdback Amount and (Z) with respect to each
Optionholder, the portion of its holdback amount described in clause (A) of the
definition of Optionholders Holdback Amount.
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(b) Closing Date Payments. At the Closing, Purchaser shall pay by
wire transfer of immediately available funds: (i) to such account or accounts as
KKR II shall designate in writing to Purchaser not less than two (2) business
days prior to the Closing Date, an amount equal to (X) the product of the number
of the KKR II Shares multiplied by the Base Purchase Price Per Share (against
delivery of certificates evidencing the KKR II Shares) less (Y) the KKR II
Holdback Amount; (ii) to such account or accounts for the benefit of KKR II as
the Escrow Agent (as defined below) shall designate in writing to Purchaser not
less than two (2) business days prior to the Closing Date, an amount equal to
the KKR II Holdback Amount; (iii) to such account or accounts as 1996 Fund shall
designate in writing to Purchaser not less than two (2) business days prior to
the Closing Date, an amount equal to (X) the product of the number of 1996 Fund
Shares multiplied by the Base Purchase Price Per Share (against delivery of
certificates evidencing the 1996 Fund Shares) less (Y) the 1996 Fund Holdback
Amount; (iv) to such account or accounts for the benefit of 1996 Fund as the
Escrow Agent shall designate in writing to Purchaser not less than two (2)
business days prior to the Closing Date, an amount equal to the 1996 Fund
Holdback Amount; (v) to such account or accounts as RA shall designate in
writing to Purchaser not less than two (2) business days prior to the Closing
Date, an amount equal to (X) the product of the number of the RA Shares
multiplied by the Base Purchase Price Per Share (against delivery of
certificates evidencing the RA Shares) less (Y) the RA Holdback Amount; (vi) to
such account or accounts for the benefit of RA as the Escrow Agent shall
designate in writing to Purchaser not less than two (2) business days prior to
the Closing Date, an amount equal to the RA Holdback Amount; (vii) to such
account or accounts as GA shall designate in writing to Purchaser not less than
two (2) business days prior to the Closing Date, an amount equal to (X) the
product of the number of the GA Shares multiplied by the Base Purchase Price Per
Share (against delivery of certificates evidencing the GA Shares) less (Y) the
GA Holdback Amount; (viii) to such account or accounts for the benefit of GA as
the Escrow Agent shall designate in writing to Purchaser not less than two (2)
business days prior to the Closing Date, an amount equal to the GA Holdback
Amount; (ix) to such account or accounts for the benefit of the Management
Stockholders as the Escrow Agent shall designate in writing to Purchaser not
less than two (2) business days prior to the Closing Date, an amount equal to
(X) the product of the number of Management Shares multiplied by the Base
Purchase Price Per Share (against delivery of certificates evidencing the
Management Shares) less (Y) the
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Management Holdback Amount; (x) to such account or accounts for the benefit of
the Management Stockholders as the Escrow Agent shall designate in writing to
Purchaser not less than two (2) business days prior to the Closing Date, an
amount equal to the Management Holdback Amount; (xi) to such account or accounts
for the benefit of the Optionholders (as defined below) as the Escrow Agent
shall designate in writing to Purchaser not less than two (2) business days
prior to the Closing Date, an amount equal to (X) the sum of (1) the product of
the number of shares of Company Common Stock subject to Company Stock Options
outstanding immediately prior to the Closing multiplied by the Base Purchase
Price Per Shares minus (2) the aggregate exercise price of all Company Stock
Options outstanding immediately prior to the Closing (against presentation of
the applicable document pursuant to Section 1.04(c)) less (Y) the Optionholders
Holdback Amount; and (xii) to such account or accounts for the benefit of the
Optionholders as the Escrow Agent shall designate in writing to Purchaser not
less than two (2) business days prior to the Closing Date, an amount equal to
the Optionholders Holdback Amount. For the avoidance of doubt, the sum of all of
the payments described in this Section 1.02(b) shall equal the Base Purchase
Price.
(c) Purchase Price Adjustment.
(i) At least two (2) business days prior to the Closing Date,
Sellers and Purchaser shall agree on a good faith estimate of current assets and
current liabilities, as those terms are defined as of December 31, 2003 under
generally accepted accounting principles in the United States ("GAAP"), as of
the Closing Date (but without giving effect to the Closing) (the "Estimated
Working Capital Amount"), which Estimated Working Capital Amount shall be used
to adjust the Base Purchase Price on the Closing Date. In the event the parties
cannot agree, the Estimated Working Capital Amount shall be reasonably
established by Sellers in good faith, after consultation with Purchaser. Without
limiting the foregoing, "current assets" for purposes of this Section 1.02(c)(i)
shall include cash (other than cash held in escrow with respect to the items set
forth on Schedule 1.02(c)(i)), accounts receivable, income tax receivable,
prepaid expenses (including utilities, real estate taxes and other prepaid
items), base stock and other supplies, inventory, deposits, current portion of
notes receivable and other miscellaneous current assets of the Company and its
Subsidiaries (and, for the avoidance of doubt, shall also include any assets of
the type excluded in the calculation of Reference Working Capital Amount
pursuant to Section 1.02 hereof); and "current liabilities" for purposes of this
Section 1.02(c)(i)
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shall include accounts payable, short-term debt, accrued and unpaid real estate
taxes, accrued and unpaid interest on any financings to be assumed by Purchaser,
other accrued liabilities such as payroll, vacation, employee benefits and
workers compensation claims as well as customer deposits, deferred income and
other miscellaneous current liabilities of the Company and its Subsidiaries
(and, for the avoidance of doubt, shall also include all liabilities of the type
excluded in the calculation of Reference Working Capital Amount pursuant to
Section 1.02 hereof). If the Estimated Working Capital Amount exceeds the
Reference Working Capital Amount as of the Closing Date, the Base Purchase Price
shall be increased by the amount of such difference. If the Estimated Working
Capital Amount is less than the Reference Working Capital Amount as of the
Closing Date, the Base Purchase Price shall be reduced by the amount of such
difference.
(ii) Within ninety (90) days after the Closing Date, Sellers and
Purchaser shall agree on a final calculation of current assets and current
liabilities of the Company under GAAP as of the Closing Date (but without giving
effect to the Closing) (each as calculated in accordance with Section 1.02(c)(i)
and for the avoidance of doubt, shall include all assets and liabilities of the
type excluded in the calculation of Reference Working Capital Amount pursuant to
Section 1.02 hereof), (the "Final Working Capital Amount"). If the parties
cannot agree on the Final Working Capital Amount within such ninety (90)-day
period, the Final Working Capital Amount shall be determined by a nationally
recognized firm of independent public accountants mutually agreed upon by
Sellers and Purchaser, and the Final Working Capital Amount determined by such
accountants shall be final and conclusive for all purposes hereunder. The costs
of such accountants shall be split evenly between Sellers and Purchaser. The
Final Purchase Price shall be calculated by readjusting the Base Purchase Price
using the Final Working Capital Amount in lieu of the Estimated Working Capital
Amount. If the Base Purchase Price paid at the Closing was in excess of the
Final Purchase Price, Sellers shall promptly (but in any event within five (5)
business days after the Final Working Capital Amount has been agreed upon or
determined by the accountants) direct the Escrow Agent to pay to Purchaser from
the Working Capital Subaccounts, an amount reflecting the difference between the
Base Purchase Price and the Final Purchase Price. All such payments shall be
made pro rata (calculated based on Percentage Share). For the avoidance of
doubt, any payment obligations of KKR II pursuant to this Section 1.02(c)(ii)
shall be satisfied only out of the Working Capital Subaccount of the KKR II
Holdback Amount, any payment obligations of 1996 Fund pursuant to this Section
1.02(c)(ii) shall be satisfied only out of the Working Capital
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Subaccount of the 1996 Fund Holdback Amount, any payment obligations of RA
pursuant to this Section 1.02(c)(ii) shall be satisfied only out of the Working
Capital Subaccount of the RA Holdback Amount, any payment obligations of GA
pursuant to this Section 1.02(c)(ii) shall be satisfied only out of the Working
Capital Subaccount of the GA Holdback Amount, any payment obligations of the
Management Stockholders pursuant to this Section 1.02(c)(ii) shall be satisfied
only out of the Working Capital Subaccount of the Management Holdback Amount,
and any payment obligations of the Optionholders pursuant to this Section
1.02(c)(ii) shall be satisfied only out of the Working Capital Subaccount of the
Optionholders Holdback Amount; provided that with respect to each Seller,
Management Stockholder and Optionholder, the payment shall not exceed such
person's Percentage Share of the Working Capital Subaccount. If the Base
Purchase Price paid at the Closing was less than the Final Purchase Price,
Purchaser shall promptly (but in any event within five (5) business days after
the Final Working Capital Amount has been agreed upon or determined by the
accountants) pay to (i) Sellers and to (ii) the Escrow Agent for the benefit of
the Management Stockholders and Optionholders (in accordance with their
Percentage Share) the amount of such deficiency. This Section 1.02(c)(ii) shall
survive the Closing.
(iii) Notwithstanding anything to the contrary in the foregoing,
for purposes of calculating the Estimated Working Capital Amount and the Final
Working Capital Amount (but not the Reference Working Capital Amount), the
parties or the accountants, as the case may be, shall assume that all restricted
stock of the Company has vested and that all Company Stock Options have been
exercised.
(d) If there is a breach of Section 3.07 (after taking into account
all materiality qualifications, knowledge qualifiers and baskets) or Section
3.19(a)(iii) (after taking into account all materiality qualifications,
knowledge qualifiers and baskets) or the last sentence of Section 3.14(c) (after
taking into account the knowledge qualifier), in each case, caused by an action,
suit, proceeding or investigation against the Company or any of its Subsidiaries
commenced after the date hereof, the parties shall create an additional holdback
from the Base Purchase Price (the "Supplemental Holdback") which will affect
each of the Sellers, the Management Stockholders and the Optionholders pro rata
(calculated based on their Percentage
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Share). If the parties cannot agree on the amount of the Supplemental Holdback,
the parties shall refer the matter to an independent arbitrator mutually
acceptable to the parties (the "Independent Arbitrator") for a determination of
the amount of Losses (as defined below) which would reasonably be likely as a
result of a breach of Section 3.07 (after taking into account all materiality
qualifications, or knowledge qualifiers and baskets therein), Section
3.19(a)(iii) (after taking into account all materiality qualifications, or
knowledge qualifiers and baskets therein), or the last sentence of Section
3.14(c) (after taking into account the knowledge qualifier) which amount shall
become the amount of the Supplemental Holdback. The Independent Arbitrator shall
hold a hearing and render his decision, which shall be final and binding upon
the parties, within ten (10) days following such referral. Each party hereto
shall be entitled to submit a written brief to the Independent Arbitrator (with
a copy being simultaneously provided to the other parties) prior to the hearing.
The costs and expenses of the Independent Arbitrator shall be borne equally by
Purchaser and the Company. Upon determination of the Supplemental Holdback, such
amount shall be deposited with the Escrow Agent. Upon the final and
non-appealable resolution of such action, suit, proceeding or investigation or
upon the agreement of Sellers and Purchaser, to the extent the amount of the
Supplemental Holdback is greater than such Losses as finally determined or
agreed, the amount of such Losses shall be released to Purchaser and the
remainder shall be released pro rata (calculated based on Percentage Share) to
Sellers, the Management Stockholders and the Optionholders. If the amount of the
Supplemental Holdback is less than such Losses as finally determined or agreed,
the amount of the Supplemental Holdback shall be released to Purchaser and
Purchaser shall have no further recourse to Sellers, the Management Stockholders
and the Optionholders.
1.03 Deposit. Simultaneously with the execution of this Agreement by
the parties, Purchaser shall deliver to an escrow agent designated by 1996 Fund
for the benefit of Sellers, Management Stockholders and Optionholders by wire
transfer of immediately available funds, a deposit in the amount of Seventy-Five
Million Dollars ($75,000,000) (the "Deposit"), which Deposit shall be deposited
in an interest-bearing account in the escrow agent's name at a
nationally-recognized banking institution. Upon Closing, the escrow agent, on
behalf of Sellers, Management Stockholders and Optionholders, shall refund to
Purchaser an amount equal to the Deposit plus any interest accrued thereon from
the date the Deposit was deposited by Sellers ("Accrued Interest"). If this
Agreement is terminated by Sellers under Section 7.01(a)(ii), then,
9
Sellers shall retain the Deposit and Accrued Interest as its sole and exclusive
remedy hereunder it being the intent of the parties hereto that such payment be
treated as liquidated damages. In such instances, Purchaser shall have no claim
to, or interest in, the Deposit and Accrued Interest, and the escrow agent shall
distribute the Deposit plus Accrued Interest to Sellers, Management Stockholders
and Optionholders in a manner agreed to by Sellers. If this Agreement is
terminated under Section 7.01, in any other case, then (a) the escrow agent on
behalf of Sellers, Management Stockholders and Optionholders, shall refund to
Purchaser the amount of the Deposit plus Accrued Interest and (b) Sellers shall
have no claim to, or interest in, the Deposit and Seller shall have no remedies
against Purchaser as a result of such termination.
1.04 Treatment of Options.
(a) On the Closing Date, outstanding options to purchase shares of
Company Common Stock (the "Company Stock Options") held by any current or former
employee or director of the Company or any Subsidiary (collectively, the
"Optionholders" and each an "Optionholder") granted under any stock option or
stock purchase plan, program or arrangement of the Company (collectively, the
"Stock Plans") shall immediately vest and be canceled and each Optionholder
shall be entitled to receive out of the funds held by the Escrow Agent pursuant
to Section 1.02(b)(xi)(X), in consideration for the cancellation of all such
Company Stock Options held by such Optionholder, an amount in cash equal to the
product of (x) the excess, if any, of (i) the Base Purchase Price Per Share over
(ii) the exercise price per share, if any, of each such Company Stock Option,
multiplied by (y) the number of shares of Company Common Stock subject to each
such Company Stock Option held by such Optionholder, reduced by applicable
withholding tax or other amounts required to be withheld by applicable law. The
"Base Purchase Price Per Share" shall be an amount equal to (i) the sum of the
Base Purchase Price and the aggregate exercise price per share of all Company
Stock Options divided by (ii) the Share Number.
(b) Except as otherwise agreed by the parties, the Stock Plans shall
terminate as of the Closing Date.
(c) As a condition to the tender of payment to any Optionholder
hereunder, each Optionholder shall present their original option grant letter,
option grant agreement, or similar instrument (or affidavit of ownership and
indemnity reasonably acceptable to Purchaser), for cancellation, and, upon
payment, Optionholder shall have no further rights thereunder.
10
ARTICLE II. CLOSING.
2.01 Date of Closing. The closing of the transactions contemplated
hereby (the "Closing") shall take place at the offices of Xxxxxxx Xxxxxxx &
Xxxxxxxx LLP ("Xxxxxxx Xxxxxxx"), 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, at 9:00 a.m. (New York City time), on the Closing Date. For purposes of
this Agreement, all calculations to be made as of the Closing Date shall be made
as of 11:59 p.m. New York City time on the Closing Date.
2.02 Deliveries. At the Closing: (i) the parties shall execute and
deliver to each other the documents referred to in Sections 6.02 and 6.03
hereof; and (ii) Purchaser shall deliver to each of KKR II, 1996 Fund, RA, GA
and the Escrow Agent (for the benefit of KKR II, 1996 Fund, RA, GA, the
Management Stockholders and the Optionholders) the payments to which they are
entitled to pursuant to Section 1.02(b).
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND OF SELLERS.
The Company represents and warrants to Purchaser, and with respect to
Sections 3.01(c), 3.03(a), 3.04(b), 3.05(b) and 3.08(b), each Seller with
respect to itself represents and warrants severally to Purchaser, as follows:
3.01 Capitalization of the Company and Title to Shares. The
authorized capital stock of the Company consists of 700,000 shares of Company
Common Stock, of which 556,285 shares are issued and outstanding as of the date
hereof; all of such shares of Company Common Stock are owned of record by such
holders as set forth on Schedule 3.01(a). The Shares are validly issued, fully
paid and non-assessable. As of the date hereof, other than the 556,285 shares of
Company Common Stock outstanding and the Company Stock Options, there are no
securities outstanding, and (except as contemplated in Section 5.11(b)(ii)) at
the Closing Date there will not be any securities outstanding, which are
convertible into, exchangeable for, or carrying the right to acquire, equity
securities (or securities convertible into or exchangeable for equity
securities) of the Company, or subscriptions, warrants, options, calls,
convertible securities, registration or other rights or other arrangements or
commitments obligating the Company to issue, transfer or dispose of any of its
equity securities or any ownership interest therein and there are no pre-emptive
rights in respect of the shares of Company Common Stock.
11
There are no outstanding obligations of the Company or any of its Subsidiaries
to repurchase, redeem or otherwise acquire any shares of Company Common Stock
(other than put rights held by the Management Stockholders which are exercisable
upon retirement, death or disability and, in the case of restricted stock,
certain put rights exercisable on or about January 1, 2005).
(b) As of the date hereof, Company Stock Options are owned of record
by such holders as set forth on Schedule 3.01(b). As of the date hereof, there
are outstanding Company Stock Options to acquire 135,501 shares of Company
Common Stock. All of the Common Stock Options were issued or granted within the
Stock Plans and the Company Stock Options can be cancelled in accordance with
Section 1.04 without further liability to the Company (except as provided
herein).
(c) Upon the transfer and delivery of the shares of Company Common
Stock being sold hereunder by each Seller to Purchaser at the Closing, Purchaser
will receive good and valid title to such shares of Company Common Stock, free
and clear of all liens, pledges, charges, claims, mortgages, deeds of trust,
security interests, restrictions, rights of first refusal, defects in title, or
other burdens, options or encumbrances of any kind ("Liens"), and such shares of
the Company Common Stock shall not be subject to any voting or transfer
restrictions (other than restrictions generally imposed on securities under U.S.
federal, state or foreign securities laws).
3.02 Subsidiaries. (a) Except as set forth on Schedule 3.02, the
Company does not own, directly or indirectly, any capital stock or any other
equity interest in any corporation, partnership, trust, limited liability
company or other legal entity, whether incorporated or unincorporated
(collectively, the "Subsidiaries" and each a "Subsidiary").
(b) The name, jurisdiction of incorporation, and authorized capital
stock and issued and outstanding shares of each of the Subsidiaries is as set
forth on Schedule 3.02. Except as set forth on Schedule 3.02, the Company owns,
directly or indirectly, all of the issued and outstanding shares of capital
stock or equity interests of each of the Subsidiaries (collectively, the
"Subsidiary Shares"), as set forth on Schedule 3.02, and the Subsidiary Shares
are validly issued, fully paid and non-assessable. There are not now, and at the
Closing Date there will not be, any outstanding securities convertible into,
exchangeable for, or carrying the right to acquire, equity securities (or
securities convertible into or exchangeable for equity securities) of any of the
Subsidiaries, or subscriptions, warrants, options, calls, convertible
securities, registration or
12
other rights or other arrangements or commitments
obligating any Subsidiary to issue, transfer or dispose of any of its equity
securities or any ownership interest therein.
(c) The Company has good and valid title to its Subsidiary Shares
free and clear of any Liens other than Permitted Exceptions (as defined below)
and free and clear of any covenant, condition, restriction, voting trust
arrangement or adverse claims (other than restrictions on transferability
generally imposed on securities under U.S. federal, state or foreign securities
laws).
3.03 Authorization of Agreement. (a) Each Seller has all necessary
partnership power and authority to execute, deliver and perform this Agreement
and has taken all partnership proceedings necessary to authorize the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each Seller and, assuming this Agreement
constitutes the valid and binding obligation of Purchaser, the Company and each
other Seller, constitutes the valid and binding obligation of each Seller,
enforceable against each Seller in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar laws relating to or affecting
the rights of creditors generally and by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and by an implied covenant of good faith and fair dealing.
(b) The Company has all necessary corporate power and authority to
execute, deliver and perform this Agreement and has taken all proceedings
necessary to authorize the consummation of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by the Company and, assuming
this Agreement constitutes the valid and binding obligation of Purchaser and
each Seller, constitutes the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar laws relating to or affecting
the rights of creditors generally and by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and by and implied covenant of good faith and fair dealing.
13
3.04 No Conflicts. (a) Except as set forth on Schedule 3.04, neither
the execution, delivery or performance of this Agreement, nor the consummation
by Sellers of the transactions contemplated hereby, nor compliance by Sellers
with the terms and provisions hereof, will: (i) conflict with the organizational
documents of the Company or any Subsidiary; (ii) conflict with, or result in the
breach or termination of, or constitute a default (or with notice or lapse of
time or both, constitute a default) under or result in the termination or
suspension of, or accelerate the performance required by the terms, conditions
or provisions of, any note, bond, mortgage, indenture, license, lease,
agreement, commitment or other instrument which would, in each case, be a
"material contract" under Rule 601 of Regulation S-K under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") to which the Company or
any of the Subsidiaries is a party or by which any of the foregoing is bound;
(iii) constitute a violation by the Company or any Subsidiary of any statute,
law, rule, regulation, order or ordinance (collectively, "Laws") of any
governmental authority, commission, board agency, public body or authority,
domestic or foreign (each, a "Governmental Authority") applicable to any of the
foregoing; or (iv) result in the creation or imposition of any Lien on any asset
of the Company or any of its Subsidiaries; except, in the case of clause (iii),
for such conflicts, violations, defaults, breaches, terminations, suspensions or
acceleration of performance which, taken as a whole, would not reasonably be
likely to have a Material Adverse Effect, and in the case of (iv), for such
Liens which would not impair the value of assets in excess of Ten Million
Dollars ($10,000,000). "Material Adverse Effect" means a material adverse effect
on the business, assets, or financial condition of the Company and its
Subsidiaries taken as a whole other than (i) a material adverse effect caused by
any change in the economy or the lodging industry that does not have a
disproportionate effect on the Company and its Subsidiaries taken as a whole,
(ii) any seasonal change or event or (iii) a material adverse effect caused by
the announcement of the transactions contemplated hereby or identity of
Purchaser.
(b) Neither the execution, delivery or performance of this Agreement,
nor the consummation by each Seller of the transactions contemplated hereby, nor
compliance by each Seller with the terms and provisions hereof, will (i)
conflict with, or result in the breach or termination of, or constitute a
default (or with notice or lapse of time or both, constitute a default) under or
result in the termination or suspension of, or accelerate the performance
required by the terms, conditions or provisions of, any note, bond, mortgage,
indenture, license,
14
lease, agreement, commitment or other instrument to which such Seller is a party
or by which such Seller is bound or (ii) constitute a violation by such Seller
of any Laws of any Governmental Authority applicable to any of the foregoing,
except where such violation would not reasonably be likely to have a Material
Adverse Effect.
3.05 No Consents. (a) No consent, approval or authorization of, or
filing with, or exemption by, any Governmental Authority is required in
connection with the execution, delivery or performance by the Company of this
Agreement excluding (i) filings and notices not required to be given or made
until after the Closing Date, (ii) filings, at any time, of tax returns, tax
reports and tax information statements, (iii) any consent, approval,
authorization, exemption or filing, if any, which Purchaser is required to
obtain or make or (iv) any consent, approval, authorization, exemption or filing
which, if not obtained or made, would not reasonably be likely to have a
Material Adverse Effect or would not prevent or materially delay Sellers from
performing their obligations under this Agreement in all material respects.
(b) Assuming the accuracy of the representations set forth in Section
4.07, no consent, approval or authorization of, or filing with, or exemption by,
any Governmental Authority is required in connection with the execution,
delivery or performance by Sellers of this Agreement excluding (i) filings and
notices not required to be given or made until after the Closing Date, (ii)
filings, at any time, of tax returns, tax reports and tax information
statements, (iii) any consent, approval, authorization, exemption or filing, if
any, which Purchaser is required to obtain or make, (iv) any consent, approval,
authorization, exemption or filing relating to the operation of the business of
the Company or its Subsidiaries or (v) any consent, approval, authorization,
exemption or filing which, if not obtained or made, would not reasonably be
likely to have a Material Adverse Effect or would not prevent or materially
delay Sellers from performing their obligations under this Agreement in all
material respects.
3.06 Compliance with Laws. The Company and its Subsidiaries hold all
permits, licenses, authorizations, memberships, consents, certificates,
registrations, qualifications, variances, exemptions, orders, franchises,
approvals or other rights and privileges of any Governmental Authority necessary
for the lawful conduct of each of their respective businesses (collectively, the
"Permits"), except where the failure to so hold has not had, and would not
reasonably be expected to have, a Material Adverse Effect. Except as set forth
on
15
Schedule 3.06, the Company and each Subsidiary are substantially in compliance
with applicable material Laws and the terms of the material Permits.
3.07 Litigation. Except as covered by insurance policies (subject to
applicable self-insured retentions) or as set forth on Schedule 3.07, (i) there
is no action, suit, investigation or proceeding pending or, to the knowledge of
the Company, threatened which individually (or in the aggregate to the extent
the action, suit, investigation or proceeding is related) is reasonably likely
to result in damages payable by the Company or any Subsidiary in excess of Ten
Million Dollars ($10,000,000) and which involve the Company or any of its
Subsidiaries before any court or before any Governmental Authority, or which
would prevent or materially delay the performance by Sellers of their
obligations hereunder or which seeks to enjoin or obtain damages in respect of
the consummation of the transactions contemplated hereby, and (ii) there are no
outstanding orders, rulings, judgments or decrees by which the Company or any
Subsidiary or any of their respective assets are bound or subject which,
individually, is reasonably likely to result in damages payable by the Company
or any Subsidiary in excess of Ten Million Dollars ($10,000,000). Except as set
forth on Schedule 3.07, there is no action, suit, proceeding or investigation
that the Company or any Subsidiary currently intends to initiate by filing a
complaint with any court or Governmental Authority. Except as set forth on
Schedule 3.07, to the knowledge of the Company, there are no actions, charges,
indictments or investigations of any of Sellers or the trustees, officers,
employees or agents of the Company or any Subsidiary, whether pending or
threatened, which involves allegations of criminal violation of any Law, in each
case acting on behalf of the Company or any Subsidiary.
3.08 No Brokers. (a) Except for fees payable to Xxxxxxx, Xxxxx & Co.,
("GS&Co."), the Company has not incurred any obligation or liability,
contingent or otherwise, for brokers' or finders' fees or commissions in
connection with the transactions contemplated hereby for which the Company
or any of its Subsidiaries is liable.
(b)Sellers have not incurred any obligation or liability, contingent
or otherwise, for brokers' or finders' fees or commissions in connection with
the transactions contemplated hereby for which the Company or any of its
Subsidiaries is liable.
16
3.09 Organization and Authority. The Company and each of its
Subsidiaries is a corporation or other form of entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization with all requisite corporate power and authority
to own, lease and operate its properties and assets and to carry on its business
as currently conducted except where the failure to be so in good standing or to
have any such corporate power and authority would not reasonably be likely to
have a Material Adverse Effect. The Company and each of its Subsidiaries is duly
qualified to do business and in good standing as a foreign entity in the
jurisdictions where the nature of the property owned or leased by it, or the
nature of the business conducted by it, makes such qualification necessary,
except where the failure to be so in good standing or to have such qualification
would not reasonably be likely to have a Material Adverse Effect. True and
complete copies of the certificate of incorporation and by-laws of the Company
and each of its Subsidiaries, each as amended to date, have heretofore been made
available to Purchaser.
3.10 Financial Statements. (a) Attached hereto as Schedule 3.10(a)(i)
are the audited consolidated balance sheets and statements of income of the
Company as at October 31, 2003 and October 31, 2002, and the related statements
of operations and retained deficit and statements of cash flows of the Company
for the years then ended (the "Audited Financial Statements"). Such Audited
Financial Statements were prepared in accordance with GAAP. In addition,
attached hereto as Schedule 3.10(a)(ii) are the unaudited consolidated Company
balance sheet as at December 31, 2003, and the related statements of income and
retained deficit and statements of cash flows of the Company for the two (2)
months then ended (the "Interim Financial Statements"). The Audited Financial
Statements and Interim Financial Statements are hereinafter collectively,
referred to as the "Financial Statements."
(b) In each case, (i) the Financial Statements have been prepared in
accordance with GAAP, except for the absence of full footnote disclosures and
schedules and normal year-end audit adjustments with respect to Interim
Financial Statements, (ii) the Financial Statements were prepared by management
of the Company and (iii) the Financial Statements present fairly in all material
respects, as of their respective dates and for the periods set forth therein,
the consolidated financial position, results of operations or cash flows, as the
case may be, of the Company and its Subsidiaries.
17
(c) The books of account and other financial records of the Company
and its Subsidiaries are true, complete and correct in all material respects,
have been maintained in accordance with good business practices, and are
accurately reflected in all material respects in the consolidated financial
statements of the Company.
(d) The books and other records of the Company and its Subsidiaries
contain in all material respects all corporate action of the stockholders,
directors and any board committees of the Company and its Subsidiaries.
3.11 Undisclosed Liabilities. Except for the liabilities: (a) set
forth on the Financial Statements; (b) set forth on Schedule 3.11 attached
hereto; (c) the subject matter of which is covered by any other provisions of
this Article III; or (d) incurred in the ordinary course of business consistent
with past practice since October 31, 2003, neither the Company nor any
Subsidiary is subject to any liability, whether absolute, accrued, contingent or
otherwise and whether due or to become due, which would reasonably be likely to
have a Material Adverse Effect.
3.12 Intellectual Property. Schedule 3.12 contains an accurate and
complete description of all registered trademarks owned by the Company or any
Subsidiary and all existing and pending federal and state trademark
registrations and applications therefor other than trademarks using the name
"KSL" (all such registered trademarks and applications, regardless of whether
they are listed, the "Intellectual Property"). To the knowledge of Sellers, the
Intellectual Property does not infringe on any trademarks, copyrights or any
other rights of any person. Except as set forth on Schedule 3.12, no
registration relating to any Intellectual Property has lapsed, expired or been
abandoned or canceled by the Company or any Subsidiary and none of the
Intellectual Property is subject to any outstanding order, decree, judgment,
stipulation, injunction, written restriction or agreement restricting the scope
of use thereof, in either case which would be reasonably likely to have a
Material Adverse Effect. Except as would not be reasonably likely to have a
Material Adverse Effect, the Company and its Subsidiaries own, or possess
adequate and enforceable licenses to use, all material intellectual property
rights necessary to permit the Company and its Subsidiaries to conduct in all
material respects their business as now conducted. Except as set forth on
Schedule 3.12, to the knowledge of Sellers, there are no material infringing or
diluting uses of the Intellectual
18
Property. Neither the Company nor any Subsidiary has granted any material
license (other than such licenses and permissions for one-time or limited use
granted in the ordinary course of business) to any person or entity to use any
of the Intellectual Property except as listed on Schedule 3.13(a).
3.13 Contracts and Commitments. (a) Schedule 3.13(a) lists all
Material Contracts (as hereinafter defined) as of the date hereof. For purposes
of this Agreement, "Material Contracts" shall mean, other than group sales
contracts (including third party booking agency agreements), (i) all contracts,
agreements or understandings with customers, suppliers and distributors of the
Company and the Subsidiaries involving any payments in an amount in excess of
Five Hundred Thousand Dollars ($500,000) within a twelve (12) month period; and
(ii) all acquisition, merger, asset purchase or sale agreements (A) entered into
by Sellers or any of their affiliates within three (3) years prior to the date
hereof or (B) providing for continuing payment obligations of the Company or any
of its Subsidiaries; (iii) all agreements which provide for, or relate to, the
incurrence by the Company or any Subsidiary of indebtedness for borrowed money
(including any interest rate or foreign currency swap, cap, collar or hedge
agreements, financial products insurance or options or forwards on such
agreements, or other similar agreements for the purpose of managing the interest
rate or foreign exchange risk associated with its financing); (iv) all
guaranties of the obligations of persons other than the Company or any
Subsidiary; (v) any settlement agreements with respect to litigation under which
the Company or any Subsidiary has continuing material obligations; (vi) all
agreements that limit the ability of any Subsidiary to pay dividends to its
parent; (vii) all agreements that limit the ability of the Company or any of its
Subsidiaries to engage in any line of business or in a business in a geographic
area; (viii) all contracts regarding the sponsorship of athletic competitions;
and (ix) all other "material contracts" within the meaning set forth in Item
601(b)(10) of Regulation S-K promulgated under the Exchange Act.
(b) Neither the Company nor any Subsidiary has given any irrevocable
power of attorney that is outstanding or will be in effect on the Closing Date
to any person for any purpose whatsoever;
(c) Neither the Company nor any Subsidiary is in material default,
nor to the knowledge of the Company is there any basis for any claim of material
default, under any of the Material Contracts. To the knowledge of the Company,
all Material Contracts are in full force
19
and effect and are valid and enforceable against the Company or Subsidiary that
is a party thereto except as enforceability may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar laws
relating to or affecting the rights of creditors generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and, to the knowledge of the Company, no other
party is in material default under a Material Contract;
(d) Sellers have heretofore delivered or made available to Purchaser
true and correct copies of all of the Material Contracts; and
(e) No Seller nor any affiliate of any Seller (other than the Company
or any of its Subsidiaries) is a guarantor of any obligation of the Company or
any of its Subsidiaries.
3.14 Employee Benefits. (a) Schedule 3.14(a) sets forth a complete
and accurate list of every material Plan (as hereinafter defined).
(b) Each Employee Program that has been maintained by the Company or
an Affiliate (as hereinafter defined) of the Company at any time during the six
(6)-year period prior to the date hereof (any of the foregoing, a "Plan"), which
has been intended to qualify under Section 401(a) or 501(c)(9) of the Internal
Revenue Code of 1986, as amended, and the rules and regulations promulgated
thereunder (the "Code"), either (i) has received a favorable determination or
approval letter from the U.S. Internal Revenue Service (the "IRS") regarding its
qualification under such section or (ii) is a prototype plan of a Master &
Prototype plan that has received a favorable determination or approval letter
from the IRS. No event or omission has occurred which would reasonably be
expected to cause any Plan that is intended to be qualified under Section 401(a)
or 501(c)(9) of the Code or that is otherwise intended to provide tax-favored
benefits under the Code, to lose its tax-qualification or otherwise fail to
satisfy the relevant requirements to provide tax-favored benefits under the
applicable Code Section (including Code Sections 105, 125, 401(a) and
501(c)(9)), respectively. No partial termination (within the meaning of Section
411(d)(3) of the Code) has occurred with respect to any Plan to which Section
411(d) of the Code applies, for which any liability remains unsatisfied.
(c) Except as would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect, neither the Company nor any of
its Affiliates has failed to comply with any applicable laws with respect to the
Plans. With respect to any Plan, there has been no "prohibited transaction" as
defined in Section 406 of the Employee Retirement
20
Income Security Act of 1974, as amended ("ERISA"), or Code Section 4975 for
which any liability to the IRS, the Department of Labor and any other applicable
governmental or regulatory agency remains unsatisfied. All payments and/or
contributions required to have been made (under the provisions of any agreements
or other governing documents or applicable law) with respect to all Plans (i)
have been made in a timely manner, (ii) have been accrued on the Financial
Statements, to the extent required by GAAP, or (iii) to the extent not timely
made, have been made, and any taxes and/or penalties for failure to make such
timely payments and/or contributions have been satisfied. No litigation or
governmental administrative proceeding (or investigation) or other proceeding
(other than those relating to routine claims for benefits) is pending or, to the
knowledge of the Company, threatened, with respect to any Plan.
(d) Except as set forth on Schedule 3.14(a), no Plan (i) is or was
subject to Title IV of ERISA, Code Section 412 or ERISA Section 302 or (ii)
provides health care or any other non-pension benefits to any employees of the
Company or its Affiliates after their employment is terminated (other than as
required by part 6 of subtitle B of Title I of ERISA) or contains provisions
committing to provide such post-termination benefits in the future.
(e) Except with respect to those Plans set forth on Schedule 3.14(e),
with respect to each material Plan, true, complete and accurate copies of the
following documents (if applicable to any such Plan) have previously been
delivered to the Purchaser: (i) all documents embodying or governing such Plan,
and any funding medium for the Plan (including, without limitation, trust
agreements) as they may have been amended to the date hereof; (ii) the most
recent IRS determination or approval letter with respect to such Plan or, if the
Plan is a prototype plan, the most recent IRS determination or approval of the
Master & Prototype plan; (iii) the three (3) most recently filed IRS Forms 5500,
with all applicable schedules and accountants' opinions attached thereto; (iv)
the three (3) most recent actuarial valuation reports completed with respect to
such Plan; (v) the summary plan descriptions (or other descriptions of such Plan
provided to employees); (vi) any insurance policy related to such Plans; and
(vii) all material correspondence to and from any state or federal agency within
the last six (6) years with respect to such Plan, to the extent such
correspondence addresses a liability of the Plan or the Company or an Affiliate
that, as of the date hereof, remains unsatisfied. The Company shall use
reasonable efforts to obtain any of the foregoing documents that have not, as of
the date hereof, been
21
provided to Purchaser within ten (10) days after the execution of this Agreement
and provide them to Purchaser.
(f) Multiemployer Plans. With respect to each Plan that is a
Multiemployer Plan as described in Section 4001(a)(3) of ERISA ("MPPA Plan"):
(i) all contributions required to be made with respect to employees of the
Company and its Affiliates have been timely paid; (ii) the Company has not
incurred, and the Company does not expect to incur, directly or indirectly, any
withdrawal liability under ERISA with respect to any such plan (whether by
reason of the transactions contemplated by the Agreement or otherwise); and
(iii) the Company has not received (and does not reasonably expect to receive)
notice that any MPPA Plan is insolvent or in reorganization or that any
accumulated funding deficiency (as defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived, exists or is expected to exist with
respect to any such Plan.
(g) Except as set forth on Schedule 3.14(a), there are no written
employment, stay bonus or severance agreements with any employee of the Company.
(h)For purposes of this Section:
(i) "Employee Program" means (A) all employee benefit plans
within the meaning of ERISA Section 3(3), including, but not limited to,
multiple employer welfare arrangements (within the meaning of ERISA Section
3(40)), plans to which any employer who is not an Affiliate contributes and
employee benefit plans (such as foreign or excess benefit plans) which are not
subject to ERISA; (B) all stock option plans, stock purchase plans, bonus or
incentive award plans, severance pay policies or agreements, deferred
compensation agreements, supplemental income arrangements, vacation plans,
payroll practices, and all other employee benefit plans, agreements, and
arrangements (including any informal arrangements) not described in (A) above,
including, without limitation, any arrangement intended to comply with Code
Section 120, 125, 127, 129, 132 or 137; and (C) all plans or arrangements
providing compensation to employee and non-employee directors. In the case of an
Employee Program funded through a trust described in Code Section 401(a) or an
organization described in Code Section 501(c)(9), or any other funding vehicle,
each reference to such Plan shall include a reference to such trust,
organization or other vehicle.
(ii) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides benefits under or through such Employee
Program, or has
22
any obligation (by agreement or under applicable law) to contribute to or
provide benefits under or through such Employee Program, or if such Employee
Program provides benefits to or otherwise covers employees of such entity (or
their spouses, dependents or beneficiaries).
(iii) An entity is an "Affiliate" of a person if it would have
ever been considered a single employer with such person under ERISA Section
4001(b) or part of the same "controlled group" as such person for purposes of
ERISA Section 302(d)(8)(C).
(iv) "Multiemployer Plan" means an employee pension or welfare
benefit plan to which more than one unaffiliated employer contributes and which
is maintained pursuant to one or more collective bargaining agreements.
3.15 Absence of Certain Changes.
Except as and to the extent set forth in Schedule 3.15, between
October 31, 2003 and the date hereof, neither the Company nor any Subsidiary
has, except in the ordinary course of business or as otherwise permitted
hereunder:
(a) (i) declared, set aside or paid any dividend or other
distribution payable in property or stock in respect of any of its capital stock
(except for dividends paid by the Subsidiaries) or (ii) split, combined or
reclassified any of its capital stock or issued any other securities in respect
of, in lieu of or in substitution for shares of its capital stock or amend the
terms of any of its securities or (iii) directly or indirectly redeemed,
purchased or otherwise acquired any of its equity securities with property or
stock;
(b) incurred any obligations or liabilities (whether absolute,
accrued or contingent and whether due or to become due) that are material to the
Company and its Subsidiaries, taken as a whole;
(c) written off as uncollectible any notes or accounts receivable or
any portion thereof that are material to the Company and its Subsidiaries, taken
as a whole;
(d) authorized for issuance, issued, sold, delivered (whether through
the issuance or granting of options, warrants, commitments, subscriptions,
rights to purchase or otherwise) any stock of any class or any other voting
securities (including indebtedness having the right to vote) or equity
equivalents (including stock options and stock appreciation rights) (other than
issuances pursuant to the exercise of Company Stock Options granted prior to the
date of this Agreement) except for the authorization, issuance or grant of stock
and options to employees of the Company or its Subsidiaries;
23
(e) sold, leased, transferred, mortgaged, pledged, encumbered or
disposed of any properties or assets, whether real, personal, fixed, tangible or
intangible, that are material to the Company and the Subsidiaries, taken as a
whole, except for transfers of the Excluded Real Properties;
(f) made any commitments for capital assets or acquisitions of real
property in excess of One Hundred Thousand Dollars ($100,000) except pursuant to
the Company's and its Subsidiaries' existing budgets, copies of which have been
provided or made available to Purchaser and except for the acquisition of the
Transferred Real Properties and the interests of the JV Affiliates (as defined
below);
(g) except for indebtedness for borrowed money (including letters of
credit) in the ordinary course of business under that certain $85,000,000 Credit
Agreement, dated as of May 7, 2003, among KSL Recreation Group, Inc., as the
Borrower, various financial institutions as the lenders, and Deutsche Bank Trust
Company Americas, as the Administrative Agent (the "Credit Agreement"), incurred
or assumed any indebtedness for borrowed money or guaranteed any such
indebtedness or issued or sold any debt securities or warrants or rights to
acquire any debt securities of the Company or any of its Subsidiaries or
guaranteed (or become liable for) any indebtedness for borrowed money of others;
(h) made any loans, advances or capital contributions that are
material to the Company and its Subsidiaries, taken as a whole, to persons
(other than the Company or its Subsidiaries);
(i) reduced insurance coverage in any manner that is material to the
Company and its Subsidiaries, taken as a whole;
(j) except as may otherwise be required by applicable law or
regulation, GAAP or the Financial Accounting Standards Board, (i) changed any of
the accounting principles or practices used by it in any material respect or
(ii) made any material tax election except in the ordinary course of business;
(k) except, (i) to the extent required under the terms of the
applicable plan or arrangement or any employment agreement or severance
arrangement as in effect on the date hereof or consistent with past practice,
(ii) in the case of newly hired officers or employees to the extent consistent
with past practice, (iii) in the case of promotions to fill vacated positions to
the extent consistent with past practice, (iv) as a result of collective
bargaining, or (v) as required by
24
applicable law: (A) entered into, adopted, amended or terminated any Plan or any
agreement, arrangement, plan or policy between itself and one or more of its
directors or executive officers, (B) increased in any manner the compensation or
fringe benefits of any director, officer or employee except, in the case of
officers and employees, for normal increases in compensation in the ordinary
course of business or (C) paid or provided for any severance payment;
(l) materially amended or terminated or waived compliance with the
terms of or breaches under, any Material Contract, or enter into a new contract
or agreement or arrangement that would constitute a Material Contract; or
(m) agreed to take any of the foregoing actions.
3.16 Taxes. Except as set forth in Schedule 3.16(a) or except for
that which would not, individually or in the aggregate, involve, or be
reasonably likely to involve, amounts in excess of Ten Million Dollars
($10,000,000):
(a) Each of the Company and its Subsidiaries has duly and timely
filed (including pursuant to applicable extensions) all Tax Returns (as defined
below) required to be filed by it, and paid in full or made adequate provision
in the Financial Statements of the Company for all Taxes (as defined below). No
deficiencies for any Taxes have been proposed or assessed in writing against or
with respect to any Taxes due by or Tax Returns of the Company or any of its
Subsidiaries; and there are no Liens for Taxes upon the assets of either the
Company or its Subsidiaries, except for statutory liens for Taxes not yet due
and payable or Liens for Taxes that are being contested in good faith by
appropriate proceedings and for which adequate reserves have been provided.
(i) Neither the Company nor any of its Subsidiaries (A) is or
has ever been a member of an affiliated group (other than a group the common
parent of which is Company) filing a consolidated tax return or (B) has any
liability for Taxes of any person arising from the application of Treasury
Regulation section 1.1502-6 or any analogous provision of state, local or
foreign law, or as a transferee or successor, by contract, or otherwise.
(ii) All Taxes required to be withheld, collected or deposited
by or with respect to the Company and each of its Subsidiaries have been timely
withheld, collected or deposited as the case may be, and to the extent required,
have been paid to the relevant taxing authority.
25
(b) Effective as of the Closing, neither the Company nor any of its
Subsidiaries will have any accumulated earnings and profits (for Federal income
tax purposes) and taking into account any items of income, gain, deduction and
loss for Federal income tax purposes properly arising in connection with the
Closing, and neither the Company nor any of its Subsidiaries will have any
current earnings and profits (for Federal income tax purposes) for the short
fiscal year which ends or would be deemed to end on the date of the Closing,
assuming for this purpose that the Company and each of the Subsidiaries are
treated as "liquidating" in connection with the Closing in a transaction which
satisfies the requirements of Section 332 of the Code.
(c) Definitions. For purposes of this Agreement the terms below shall
have the following respective meanings:
(i) "Taxes" shall mean all taxes, charges, levies, penalties or
other assessments imposed by any United States federal, state, local or foreign
taxing authority, including, but not limited to income, excise, property, sales,
transfer, franchise, payroll, withholding, social security or other similar
taxes, including any interest or penalties attributable thereto.
(ii)"Tax Return" shall mean any return, report, information
return or other document (including any related or supporting information)
required to be filed with any taxing authority with respect to Taxes, including
information returns, claims for refunds of Taxes and any amendments or
supplements to any of the foregoing.
3.17 Transactions with Affiliates. Except as described on Schedule
3.17, neither the Company nor any Subsidiary has entered into any agreement,
contract, subcontract, lease, understanding, instrument, note, option, warranty
purchase order, license, sublicense, insurance policy or legally binding
commitment or undertaking of any nature currently in effect, directly or
indirectly, with any of its officers or directors, in each case other than on
market terms. Except as described on Schedule 3.17, neither the Company nor any
Subsidiary has any loans receivable from any affiliate of the Company or from
any director, officer or employee of the Company or any Subsidiary.
3.18 Insurance. All insurance policies to which the Company or any
Subsidiary is a party or that provide coverage to the Company, any Subsidiary or
any director or
26
officer of the foregoing (a) are valid, outstanding, and enforceable, (b) are
issued by an insurer that is financially sound and reputable and (c) taken
together, provide adequate insurance coverage for the assets and the operations
of the Company and its Subsidiaries for all risks normally insured against by a
person carrying on the same business or businesses as the Company and its
Subsidiaries. Except as set forth on Schedule 3.18, neither the Company nor any
Subsidiary has received any notice of premature cancellation or termination with
respect to any existing material insurance policy of the Company or any
Subsidiary.
3.19 Environmental Matters. (a) Except as set forth in Schedule 3.19
or in any "Phase I" or "Phase II" environmental site assessments reports,
asbestos reports or other property condition reports that have been made
available to Purchaser prior to the date hereof, or except as would not be
reasonably likely to result in a liability of the Company or any Subsidiary in
excess of Twenty Million Dollars ($20,000,000):
(i) the Company, the Subsidiaries and, to the knowledge of
Sellers, the Company Real Property are in compliance with all Environmental Laws
applicable to them;
(ii) as of the date hereof, neither the Company nor any
Subsidiary has received any written notice or claim alleging that it has
violated any Environmental Laws or that it is liable to any person as a result
of a Release of any Materials of Environmental Concern; and
(iii) neither the Company nor any Subsidiary is a party to any
pending proceedings, or has knowledge of any proceedings threatened against the
Company or any Subsidiary, pursuant to any Environmental Laws or concerning any
Release of any Materials of Environmental Concern.
(b) Copies of the most recent so-called "Phase I" or "Phase II"
environmental site assessments reports, asbestos reports or other property
condition reports in the Company's or any Subsidiary's possession containing
material information concerning environmental conditions at any property
currently or formerly owned or leased by the Company or any Subsidiary have been
made available to Purchaser.
(c) Definitions. For purposes of this Agreement, the terms below
shall have the following respective meanings:
(i) "Environmental Laws" shall mean any and all environmental
federal, state, regional or local statutes, laws, rules, regulations, codes,
orders, plans, injunctions, decrees, rulings or ordinances, or judicial or
enforceable administrative interpretation thereof,
27
any of which govern (or purport to govern) or relate to pollution, protection of
the environment, public health and safety as affected by exposure to harmful or
deleterious substances, air emissions, water discharges, hazardous or toxic
substances, solid or hazardous waste or occupational health and safety, as any
of these terms are defined in such statutes, laws, rules, regulations, codes,
orders, plans, injunctions, decrees, rulings or ordinances, as amended, or
judicial or enforceable administrative interpretation thereof, including the
Resource Conservation and Recovery Act, the Comprehensive Environmental Response
Compensation and Liability Act, the Hazardous Materials Transportation Act, the
Toxic Substances Control Act, the Clean Air Act, the Clean Water Act, the
Federal Insecticide, Fungicide and Rodenticide Act, the Emergency Planning and
Community Right-to-Know Act, the Superfund Amendments and Reauthorization Act of
1986, Toxic Chemical Release Inventory Reporting and Compliance, and the
Occupational Safety and Health Act to the extent concerning exposure to harmful
or deleterious substances, and any so-called "Super Fund" or "Super Lien" law,
environmental laws administered by the United States Environmental Protection
Agency.
(ii) "Materials of Environmental Concern" shall mean at any
time, (a) any crude oil (or any fraction thereof), gasoline or refined petroleum
products, by-products or breakdown products, radioactive materials,
asbestos-containing materials, polychlorinated biphenyls, urea-formaldehyde
insulation, chlorinated solvents, or radon gas and (b) any other chemicals,
materials or substances designated, classified or regulated as hazardous or
toxic or as a pollutant or contaminant under any applicable Environmental Law.
(iii) "Release" shall mean any release, including any actual or
threatened spilling, leaking, migrating, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, discharge, disposal or
disposing into the environment of any Materials of Environmental Concern.
(d) Notwithstanding anything to the contrary contained in this
Agreement, the representations and warranties in this Section 3.19 shall be
deemed the only representations and warranties in this Agreement with respect to
matters relating to Environmental Laws or to Materials of Environmental Concern.
3.20 Real Estate.
(a) The Company, or one or more of the Subsidiaries, has (i) good fee
simple title to each of the Owned Real Properties (as defined below), subject
only to the Permitted
28
Exceptions, and (ii) has a valid leasehold interest in the Leased Real Property
(as defined below), subject only to the Permitted Exceptions. Neither the
Company nor the Subsidiaries own or lease any real property other than the Owned
Real Property, the Leased Real Property and the Excluded Real Properties (as
defined below).
(b) Except as set forth on Schedule 3.20(b) or as would not be
reasonably likely to result in a liability of the Company or any Subsidiary in
excess of Twenty Million Dollars ($20,000,000), neither the Company, nor any
Subsidiary, nor any Seller has received any written notice to the effect that
any condemnation proceedings are pending or, to the knowledge of the Company,
pending or threatened with respect to any of the Company Real Property or any
portion thereof, and, to the knowledge of the Company, no such proceedings are
contemplated by any Governmental Authority.
(c) To the knowledge of the Company, no zoning, building or similar
Law is or will be violated by the continued maintenance, operation or use of the
Company Real Property as currently being utilized, or by buildings or other
improvements on any of the Company Real Property except where such violation
would not, individually, be reasonably likely to result in a liability of the
Company or any Subsidiary in excess of Twenty Million Dollars ($20,000,000) and
neither the Company, nor any Subsidiary, nor any Seller has received any written
notice of any such violation.
(d)(i) Schedule 3.20(d) lists all Material Real Property Contracts to
which the Company or the Subsidiaries are a party as of the date hereof, (ii)
Sellers have provided Purchaser with true and complete copies of all Material
Real Property Contracts, and (iii) neither the Company, or any Subsidiary, or
any Seller has received any written notice of, nor do the Company, or any
Subsidiary, or any Seller have knowledge of, any default by the Company or any
Subsidiary under any Material Real Property Contract which, if uncured, would
not, individually, be reasonably likely to result in a liability of the Company
or any Subsidiary in excess of Twenty Million Dollars ($20,000,000). As used
herein, "Material Real Property Contracts" means the collective reference to all
agreements in connection with the service, maintenance, management, operation,
use or possession of the Company Real Property, but not including Space Leases
or equipment leases, that (A) are not terminable, without payment or penalty,
upon ninety (90) days' (or less) written notice, and (B) have aggregate yearly
payments in excess of Five Hundred Thousand Dollars ($500,000).
29
(e) (i) Schedule 3.20(e) lists all of the leases of space in the
Company Real Property (the "Space Leases"), (ii) Sellers have provided Purchaser
with true and complete copies of all Space Leases, (iii) except as set forth on
Schedule 3.20(e), neither the Company, or any Subsidiary, or any Seller has
received any written notice of, nor do the Company, or any Subsidiary, or any
Seller have knowledge of, a default by the Company or any Subsidiary under any
Space Lease which, if uncured, would be reasonably likely to result in a
liability of the Company or any Subsidiary in excess of Twenty Million Dollars
($20,000,000), and (iv) except as set forth on Schedule 3.20(e), no tenant is in
default in the payment of rent under any Space Lease.
(f) (i) Sellers have provided Purchaser with a true and complete copy
of the Emerald Point Lease, and (ii) neither the Company, Sellers nor the
Emerald Point Subsidiary has received any written notice, nor have the Company,
Sellers or the Emerald Point Subsidiary have knowledge of a default by the
Company or the Emerald Point Subsidiary under the Emerald Point Lease.
(g) (i) Schedule 3.20(g) lists all of the forms of material
Membership Documents currently used, and (ii) Sellers have made available to
Purchaser true and complete copies of such forms.
(h) Flood Zone. Each structural improvement on the Company Real
Property known as the "Doral" lies outside of any flood plain or, if any such
improvement lies within a flood plain, flood insurance required by the terms of
the existing first mortgage financing of such property is in full force and
effect.
(i) Personal Property. Other than as set forth on Schedule 3.20(i),
all material personal property owned by the Company and its Subsidiaries (other
than at the Company HQ as to which no representation is made) is owned free and
clear of all Liens other than statutory liens for taxes not yet due and
Permitted Exceptions.
(j) Artwork. Schedule 3.20(j) sets forth a detailed, true and
accurate list of all of the artwork located in the public areas at the Grand
Wailea Hotel & Resort (the "Artwork") including the title, artist and exact
location of each piece. The Artwork is owned either by the Company or its
Subsidiaries free and clear of any and all Liens other than statutory liens for
taxes not yet due and Permitted Exceptions.
30
(k) Definitions. For purposes of this Agreement, the terms below
shall have the following respective meanings:
(i) "Company Real Property" means the collective reference to
the Owned Real Property and the Leased Real Property; Company Real Property
shall not include the Excluded Real Properties.
(ii) "Emerald Point Lease" means the Sublease between Lake
Xxxxxx Islands Development Authority, as sublessor, and KSL Lake Xxxxxx, Inc.,
as sublessee, dated as of August 1, 1997.
(iii) "Emerald Point Subsidiary" means KSL Lake Xxxxxx, Inc.
(iv) "Excluded Real Properties" means the properties known as
Grove #1 (as described on Exhibit C), the North Edge Portion of North Employee
Parking Lot at Citrus Clubhouse (as described on Exhibit D), and Parcel A of the
Blue View at Doral (other than the pump) (as described on Exhibit E).
(v) "Existing Surveys" means the surveys of the Company Real
Properties and the Transferred Real Properties listed on Schedule 3.20(k)(v).
(vi) "Leased Real Property" means all of the land and
improvements thereon leased pursuant to the leases set forth on Schedule
3.20(k)(vi) other than off-site storage facilities.
(vii) "Membership Documents" means all contracts, applications
and other agreements which give rights with respect to the use of the facilities
of any of the Company Real Property under any club membership programs, whether
golf club, social club or otherwise.
(viii) "Owned Real Property" means the land and improvements
thereon owned by the Company or any Subsidiary, and more particularly described
on Schedule 3.20(k)(viii); Owned Real Property shall include the Transferred
Real Property after such property is transferred to the Company or any
Subsidiary.
(ix) "Permitted Exceptions" means (1) Permitted Title Exceptions
and facts disclosed in the Existing Surveys and Updated Surveys, (2) Space
Leases, (3) Laws applicable to real property (excluding any defect, Lien or
encumbrance resulting from a violation of such Laws that is not otherwise a
Permitted Title Exception), (4) easements, restrictions, encroachments,
encumbrances, conditions and conveyances not included in (1) above which are
typical for the applicable property type and locality and which do not
materially and adversely
31
affect the value, use, or operation of the applicable Company Real Properties,
(5) Liens for real estate Taxes and assessments (including those arising by
private covenant) not yet due and payable, (6) inchoate mechanics',
materialmen's, and similar Liens that are shown on the Financial Statements, or
for sums not yet delinquent or being contested, (7) Liens securing any
financings disclosed in the Financial Statements, and (8) with respect to the
Leased Real Property, any title exceptions affecting the fee ownership of the
land thereof or any superior lease.
(x) "Permitted Title Exception" means title exceptions set forth
in the Title Commitments.
(xi) "Title Commitment" means, for each Company Real Property, a
commitment for title insurance issued by the Title Company and dated no earlier
than November 23, 2003.
(xii) "Title Company" means Fidelity National Title Company.
(xii) "Transferred Real Property" means the property referred to
in Section 5.06(i).
(xiv) "Updated Survey" means, for each Company Real Property, an
update of the Existing Survey for such Company Real Property dated no earlier
than January 1, 2004 and no later than the date of this Agreement; provided,
however, that if the Existing Survey for a Company Real Property is dated on or
after January 1, 2003, there shall not be any Updated Survey for such Company
Real Property.
3.21 Xxxx-Xxxxx-Xxxxxx Act. The transactions contemplated hereby are
exempt from filings pursuant to the Xxxx-Xxxxx-Xxxxxx Act, 15 U.S.C. 18a and
such transactions qualify for the exemption from filing pursuant to 15 C.F.R.
802.2(e) because the Company Real Property, and the assets related thereto,
consist solely of hotels and incidental assets and do not include any ski
facilities or casinos.
3.22 Labor Relations; Compliance. (a) Except as set forth on Schedule
3.22, as of the date hereof, (i) neither the Company nor any Subsidiary is a
party to any collective bargaining or other labor contract, (ii) since October
31, 2003, there has not been, and there presently is no unfair labor practice
charge or complaint pending or, to the knowledge of the Company, threatened
against the Company or any Subsidiary which, if adversely determined,
32
would be reasonably likely to have a Material Adverse Effect, and (iii) since
October 31, 2003, there has not been, and there presently is no labor strike,
slowdown, work stoppage, lockout or other labor controversy in effect or, to the
knowledge of the Company, threatened against the Company or any Subsidiary which
would be reasonably likely to have a Material Adverse Effect. To the knowledge
of the Company, no event has occurred or circumstance exists that could provide
the basis for any work stoppage or other labor dispute that would be reasonably
likely to have a Material Adverse Effect.
(b) The Company and each of its Subsidiaries complies with all Laws
relating to employment, equal employment opportunity, nondiscrimination,
immigration, wages, hours, benefits, collective bargaining, the payment of
social security and similar taxes, occupational safety and health, and plant
closing except where failure to comply would not be reasonably likely to have a
Material Adverse Effect. Neither the Company nor any Subsidiary is liable for
the payment of any compensation, damages, taxes, fines, penalties, or other
amounts, however designated, for failure to comply with any of the foregoing
Laws.
3.23 Questionable Payments. To the knowledge of the Company, neither
the Company nor any Subsidiary, nor any of their respective current or former
shareholders, partners, directors trustees, officers, employees, agents or other
persons acting on behalf of the Company or any Subsidiary, has on behalf of the
Company or any Subsidiary or in connection with the Company's or any
Subsidiary's respective businesses: (a) used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, (b) made any direct or indirect unlawful payments to any
foreign or domestic governmental officials or employees from corporate funds,
(c) established or maintained any unlawful or unrecorded fund of corporate
monies or other assets, (d) made any false or fictitious entries on the books
and records of the Company or any Subsidiary, (e) made any unlawful bribe,
rebate, payoff, influence payment, kickback or other unlawful payments of any
nature, or (f) violated any provision of the Foreign Corrupt Practices Act of
1977, as amended.
33
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser represents and warrants to Sellers as follows:
4.01 Organization of Purchaser. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the full corporate power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby.
4.02 Authorization of Agreement. The execution, delivery and
performance by Purchaser of this Agreement and the consummation by Purchaser of
the transactions contemplated hereby have been duly authorized by all necessary
corporate and stockholder action of Purchaser. This Agreement has been duly
executed and delivered by Purchaser and, assuming this Agreement constitutes the
valid and binding obligation of Sellers and the Company, constitutes the valid
and binding obligation of Purchaser, enforceable in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or similar laws relating to or
affecting the rights of creditors generally and by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and by an implied covenant of good faith and fair dealing.
4.03 No Conflicts. Neither the execution, delivery or performance of
this Agreement, nor the consummation by Purchaser of the transactions
contemplated hereby, nor compliance by Purchaser with the terms and provisions
hereof will: (a) conflict with the organizational documents of Purchaser; (b)
conflict with, or result in the breach or termination of, or constitute a
default (or with notice or lapse of time or both, constitute a default) under or
result in the termination or suspension of, or accelerate the performance
required by any of the terms, conditions or provisions of, any note, bond,
mortgage, indenture, license, lease, agreement, commitment or other instrument
to which Purchaser is a party or by which Purchaser is bound; or (c) constitute
a violation by Purchaser of any Law of any Governmental Authority applicable to
Purchaser; except, in the case of clauses (b) and (c) above, for such conflicts,
defaults, breaches, terminations, suspensions or acceleration of performance
which, taken as a
34
whole, would not be reasonably likely to materially impair Purchaser's ability
to consummate the transactions contemplated hereby.
4.04 NO CONSENTS. No consent, approval or authorization of, or filing
with, or exemption by, any Governmental Authority is required in
connection with the execution, delivery or performance by Purchaser of this
Agreement excluding any consent, approval, authorization, exemption or filing,
if any, which Sellers are required to obtain or make or which, if not obtained
or made, would not prevent or materially delay Purchaser from performing its
obligations under this Agreement in all material respects.
4.05 LITIGATION. There are no actions, suits, inquiries, proceedings or
investigations pending or, to Purchaser's knowledge, threatened before any court
or Governmental Authority against Purchaser relating to the transactions
contemplated hereby or which would prevent or materially delay the performance
by Purchaser of its obligations hereunder.
4.06 NO BROKERS. Except for fees payable to UBS Investment Bank,
Purchaser has not incurred any obligation or liability, contingent or otherwise,
for brokers' or finders' fees or commissions in connection with the transactions
contemplated hereby.
4.07 INVESTMENT PURPOSE. (a) Purchaser is purchasing the Shares and,
indirectly, the Subsidiary Shares for its own account for investment purposes
and not with a view toward distribution or re-sale in violation of the
Securities Act of 1933, as amended, and all other applicable securities laws,
rules or regulations.
(b) Purchaser acknowledges that none of the Shares or the Subsidiary
Shares has been registered under federal law or qualified under state law, but
rather has been offered for sale in accordance with certain exemptions under
applicable law and that the Shares and the Subsidiary Shares may not be resold
by it unless they are subsequently registered or qualified under applicable law,
or an exemption from registration and qualification is then available.
4.08 PURCHASER'S EXAMINATION. (a) Purchaser is not relying on any
forecasted operating results or budgets of the Company or its Subsidiaries
prepared by or on behalf of
35
Sellers. Purchaser acknowledges that it has done its own due diligence and has
received sufficient access to the Company and its Subsidiaries for purposes of
conducting due diligence.
(b) Purchaser acknowledges and agrees that no representation or
warranty has been or is being made by the Company or Sellers except as expressly
set forth in this Agreement and that no representation or warranty is being made
by the Company or Sellers as to the future operations or prospects of the
Company or any of its Subsidiaries. Purchaser acknowledges and agrees that it is
not relying on the Company's "Confidential Information Memorandum."
(c) Except as expressly provided in this Agreement, Purchaser
acknowledges that neither Sellers nor the Company have made any representations
or warranties regarding the value or condition of the assets of the Company or
its Subsidiaries. Except as expressly set forth in this Agreement, the assets of
the Company and its Subsidiaries will be held "as is, where is" with no
representations or warranties, express or implied, as to title, ownership,
quality, value, condition, operation, design, capacity, tax treatment or
otherwise, and all such representations and warranties are expressly disclaimed.
Nothing contained herein shall be construed to diminish or limit the express
representations, warranties or covenants contained in this Agreement.
4.09 FINANCIAL ABILITY. At the Closing, Purchaser shall have cash
available coupled with existing borrowing facilities or commitments that will be
sufficient to enable it to consummate the transactions contemplated hereby. True
and correct copies of any such facilities and commitments have been made
available to Sellers. The financing required to consummate the transactions
contemplated hereby is collectively referred to as the "Financing."
ARTICLE V. FURTHER AGREEMENTS OF THE PARTIES.
5.01 PAYMENTS AND RELEASE OF HOLDBACK AMOUNTS. (a) Sellers shall
exercise the "drag-along" rights with respect to the Management Shares by giving
timely notice pursuant to the Sale Participation Agreements each of the
Management Stockholders has entered into.
(b) The Company shall establish reasonable procedures relating to the
transfer of the Management Shares at the
Closing. Such procedures shall include: (i) sending to each Management
Stockholder a power-of-attorney appointing the Chief Financial Officer and
Secretary or other officer(s) of the Company as the attorneys-in-fact for the
transfer of the
36
Management Shares at the Closing, (ii) sending to each Management Stockholder
blank stock powers, (iii) establishing escrow accounts with a financial
institution as escrow agent (the "Escrow Agent") pursuant to an Escrow Agreement
(the "Escrow Agreement") among the Company, Sellers and Purchaser, substantially
in form of Exhibit B, for the holdback amounts referred to herein and (iv)
directing the Escrow Agent to invest the amounts in the escrow accounts. Sellers
shall cause the items referred to in the preceding clauses (i) and (ii) to be
sent to the Management Stockholders. Such items will be accompanied by
instructions directing the Management Stockholders to execute the
power-of-attorney and stock powers and send them to the Escrow Agent. The
Company shall use reasonable efforts to contact all persons whom it believes
hold Management Shares and Company Stock Options and shall use reasonable
efforts to cause such persons to deliver the Management Shares and documentation
related to the cancellation of Company Stock Options at the Closing.
(c) Upon the Closing and upon receipt by the Escrow Agent of proper
written instructions from Sellers and Purchaser (which shall be delivered to the
Escrow Agent simultaneously with the Closing), the Management Shares so
delivered to the Escrow Agent shall be released to Purchaser and the portion of
the Base Purchase Price payable to the Management Stockholders in respect of the
Management Shares so delivered to the Escrow Agent shall be paid to them by the
Escrow Agent in accordance with Section 1.02.
(d) With respect to any Management Shares which are free and clear of
all Liens and which are delivered to the Escrow Agent after the Closing, Sellers
and Purchaser shall direct the Escrow Agent to pay the holder thereof out of the
portion of the Management Holdback Amount contemplated in Section
1.02(a)(viii)(B), subject to the Management Holdback Amount contemplated in
Section 1.02(a)(viii)(A), if applicable.
(e) With respect to any Company Stock Options for which the applicable
document has been presented pursuant to Section 1.04(c) to the Escrow Agent
after the Closing, Sellers and Purchaser shall direct the Escrow Agent to pay
the holder thereof out of the portion of the Optionholders Holdback Amount
contemplated in Section 1.02(a)(ix)(B), subject to the Optionholders Holdback
Amount contemplated in Section 1.02(a)(ix)(A), if applicable. Subject to
shareholder approval referred to in Section 5.16, the Company shall take such
action as is necessary to accelerate the exercisability of the Options as of the
Closing and to permit payment to the Optionholders in the manner contemplated by
Section 1.04.
37
(f) Each payment by the Escrow Agent to each Management Stockholder
pursuant to Sections 5.01(c) and (d) shall be based on the respective percentage
of Management Shares owned by such Management Stockholder immediately prior to
the Closing (the "Management Percentage Share"). Each payment by the Escrow
Agent to each Optionholder pursuant to Sections 1.04 and 5.01(e) shall be based
on the respective percentage of shares of Company Common Stock subject to
Company Stock Options owned by such Optionholder immediately prior to the
Closing relative to the number of shares of Company Common Stock subject to all
Company Stock Options outstanding immediately prior to the Closing
("Optionholder Percentage Share")
(g) Sellers and Purchaser shall direct the Escrow Agent, in writing, to
release amounts from the KKR II Holdback Amount, 1996 Fund Holdback Amount, RA
Holdback Amount, GA Holdback Amount, Management Holdback Amount and the
Optionholders Holdback Amount in each case to pay Purchaser, Sellers, the
Management Stockholders and the Optionholders to the extent required by Section
1.02(c)(ii) and 5.02(e); and Sellers and Purchaser shall direct the Escrow
Agent, in writing, to release amounts from the Supplemental Holdback to the
extent required by Section 1.02(d); and Sellers and Purchaser shall direct the
Escrow Agent to release amount from the Capital Stock Subaccounts (on a pro rata
basis based on the respective percentage of Seller Shares owned by each Seller)
to the extent contemplated by Section 5.02(d).
(h) Upon the later of six (6) months from the Closing Date (except to
the extent claims were made in connection with Section 5.02(e) hereof and are
pending) and the determination of the Final Purchase Price and, if applicable,
immediately following any payment in respect thereof to Purchaser, Sellers and
Purchaser shall direct the Escrow Agent, in writing, (i) to release the
remainder of the Working Capital Subaccount of the KKR II Holdback Amount to KKR
II, (ii) to release the remainder of the Working Capital Subaccount of the 1996
Fund Holdback Amount to 1996 Fund, (iii) to release the remainder of the Working
Capital Subaccount of the RA Holdback Amount to RA, (iv) to release the
remainder of the Working Capital Subaccount of the GA Holdback Amount to GA, (v)
to release the remainder of the Management Holdback Amount (less an amount
necessary to pay Management Stockholders who have not tendered their Shares to
the Escrow Agent) to each Management Stockholder who tendered his or her
Management Shares to the Escrow Agent pro rata in accordance with such
38
Management Stockholder's Management Percentage Share and (vi) to release the
remainder of Optionholders Holdback Amount (less an amount necessary to pay
Optionholders who have not presented the applicable document under Section
1.04(c)) to each Optionholder pro rata in accordance with such Optionholder's
Optionholder Percentage Share, in each case less the amount of any unresolved
claims under Section 5.02(e), which shall be released upon resolution of such
claims. For the avoidance of doubt, (i) no portion of the Management Holdback
Amount shall be released to any Management Stockholder who has not tendered his
or her Management Shares to the Escrow Agent in accordance with this Agreement
until such Management Shares have been so tendered, and (ii) no portion of the
Optionholders Holdback Amount shall be released to any Optionholder who has not
presented the applicable document pursuant to Section 1.04(c).
(i) Following the releases set forth in Section 5.01(h), Sellers and
Purchaser shall direct the Escrow Agent to release any remaining Management
Holdback Amount (less the amount of any unresolved claims under Section 5.02(e))
and any remaining Optionholders Holdback Amount (less the amount of any
unresolved claims under Section 5.02(e)) to Purchaser or to such other person or
entity as may be required under applicable state law.
(j) Upon the later of six (6) months from the Closing Date and the
resolution of all claims under Section 5.02(d) and, if applicable, immediately
following any payment in respect thereof to Purchaser, Sellers and Purchaser
shall direct the Escrow Agent to release (i) the remainder of the Capital Stock
Subaccount of the KKR II Holdback Amount to KKR II, (ii) the remainder of the
Capital Stock Subaccount of the 1996 Fund Holdback Amount to 1996 Fund, (iii)
the remainder of the Capital Stock Subaccount of the RA Holdback Amount to RA
and (iv) the remainder of the Capital Stock Subaccount of the GA Holdback Amount
to GA.
(k) Sellers shall assign to Purchaser, and Purchaser shall assume, all
of Sellers' rights and obligations under its contracts with Management
Stockholders containing "drag-along" rights, effective simultaneously with the
Closing, and agrees to provide reasonable assistance to Purchaser (at
Purchaser's expense) in enforcing such rights following the Closing Date.
(l) Except as provided in this Section 5.01, Sellers shall have no
obligation to cause the Management Stockholders to deliver their Management
Shares to the Escrow Agent
39
and shall have no liability in respect of the failure by any Management
Stockholder to deliver his or her Management Shares on the Closing Date.
(m) The provisions of this Section 5.01 shall survive the Closing.
5.02 LIABILITIES. (a) Purchaser will, and will cause the Company to,
indemnify Sellers, the Management Stockholders and the Optionholders and their
affiliates for any liability, cost, loss, damage, claim, expense or obligation
(including attorney's fees and disbursements) ("Losses") (whenever asserted or
claimed) sustained by any of them to the extent arising from any claim or cause
of action of any third party (other than Sellers, the Management Stockholders
and the Optionholders and their respective officers, directors, employees,
agents and representatives) arising out of: (i) any action or inaction, or by
any condition, liability or obligation of the Company or any Subsidiary which
action, inaction, condition, liability or obligation occurred or existed prior
to or after the Closing; (ii) any obligations to employees incurred after the
Closing as a result of a termination of the Interim Management Agreement (other
than liabilities referred to in Section 1.02(a)(ii)); provided that such
obligations shall not be altered or modified after the Closing except to the
extent such alterations or modifications are permitted under the Interim
Management Agreement (as defined below); or (iii) the failure of Purchaser to
perform its obligations under Section 1.02(c).
(b) After the Closing Date, the Company and each Subsidiary shall
exculpate (to the greatest extent permitted by applicable Law), and Purchaser
shall, and shall cause the Company to, indemnify, defend and hold harmless, the
present and former officers, directors, employees, agents and representatives of
the Company or any of the Subsidiaries, and all persons acting as directors or
representatives of other entities at the request of the Company or its
Subsidiaries, in each case in their capacities as such against all Losses
(whenever asserted or claimed), arising out of or based on, in whole or in part,
actions or omissions in their capacities as such or any other matter existing or
occurring at or prior to the Closing Date to the fullest extent permitted under
Delaware law or the Company's certificate of incorporation or by-laws in effect
at the date of this Agreement, including provisions relating to advances of
expenses incurred in the defense of any action or suit within ten (10) days of
receipt by the Company of a request therefor; provided that other than actions
or omissions which were related to such present or former officer's, director's
or employee's gross negligence or willful misconduct. In connection therewith,
Purchaser and the Company shall be obligated to pay for only one counsel
40
for all Indemnified Parties (as defined below) unless the use of one counsel for
such Indemnified Parties would present such counsel with a conflict of interest
subject in each case to such Indemnified Party's agreement to return any
advanced funds if a court of competent jurisdiction, after all time for appeals
having been exhausted, shall have determined that such Indemnified Party is not
entitled to such amounts under Delaware law or the Company's certificate of
incorporation or by-laws.
(c) If (but only if) for any reason the indemnity provided for in
Section 5.02(a) or (b) is unavailable to any indemnified person or is
insufficient to hold each such indemnified person harmless from all such Losses,
then Purchaser, the Company and its Subsidiaries shall contribute to the amount
paid or payable by such indemnified person in such proportion as is appropriate
to reflect not only the relative benefits received by Purchaser, the Company and
its Subsidiaries, on the one hand, and such indemnified person, on the other
hand, but also the relative fault of such persons as well as any relevant
equitable considerations.
(d) Effective upon the Closing, each Seller shall severally (based upon
such Seller's Percentage Share) indemnify Purchaser and its affiliates and its
and their respective officers, directors, employees, agents and representatives
and hold each of them harmless against any Losses sustained by any of them due
to the breach of any representation or warranty of such Seller set forth in
Section 3.01(c), 3.03(a), 3.04(b), 3.05(b) and 3.08(b); provided that each such
representation and warranty shall expire six (6) months from the Closing Date
(except with respect to claims made prior to such expiration); and each Seller
shall satisfy its indemnification obligations under this Section 5.02(d) from
amounts in its respective Capital Stock Subaccount; and provided further that
Purchaser's sole recourse under this Section 5.02(d) shall be to the Capital
Stock Subaccount of such Seller and such Seller shall not have any liabilities
in excess of its respective Capital Stock Subaccount.
(e) Effective upon the Closing, each Seller, Management Stockholder and
Optionholder shall severally (based on each such person's Percentage Share) (i)
indemnify Purchaser, its affiliates and its and their respective officers,
directors, employees, agents and representatives and hold each of them harmless
against any Losses sustained by any of them arising out of or based on, in whole
or in part, any matter relating to the Excluded Real Property and any
disposition thereof, whether existing or occurring prior to, at, or after the
Closing Date, to the fullest extent permitted by law (including lenders' fees
for any necessary consent under the
41
terms and conditions of Company's and its Subsidiaries' financing existing prior
to the Closing Date or any Taxes incurred in connection with such Excluded Real
Property) and (ii) as part of such indemnification obligations, advance expenses
incurred in the defense of any action or suit within ten days of receipt by any
such person of a request therefor; provided that (A) Sellers, Management
Stockholders and Optionholders shall pay for only one counsel for all such
Indemnified Parties unless the use of one counsel for such Indemnified Parties
would present such counsel with a conflict of interest, (B) such
indemnifications shall expire six (6) months from the Closing Date (except with
respect to claims made prior to such expiration) and (C) Sellers, Management
Stockholders and Optionholders shall not be responsible for any Losses related
to Purchaser's rating agencies and lenders; and provided, further that
Purchaser's sole recourse under this Section 5.02(e) shall be to the Working
Capital Subaccount and such indemitor shall not have any liabilities in excess
of its, his or her Percentage Share of the Working Capital Subaccount.
(f) In order for a party (the "Indemnified Party") to be entitled to
any indemnification provided for under this Agreement in respect of, arising out
of or involving a claim or demand made by any person against the Indemnified
Party (a "Third Party Claim"), such Indemnified Party must notify the
indemnifying party in writing of the Third Party Claim within forty-five (45)
days after receipt by such Indemnified Party of written notice of the Third
Party Claim; provided, however, that failure to give such notification shall not
affect the indemnification obligation provided hereunder except to the extent
the indemnifying party shall have suffered actual material prejudice as a result
of such failure. Thereafter, the Indemnified Party shall deliver to the
indemnifying party, within forty-five (45) days after the Indemnified Party's
receipt thereof, copies of all notices and documents (including court papers)
received by the Indemnified Party relating to the Third Party Claim.
(g) The Indemnified Party shall not admit any liability with respect
to, or settle, compromise or discharge, any Third Party Claim without the
indemnifying party's prior written consent, which consent shall not be
unreasonably withheld or delayed; provided that, if the indemnifying party
withholds such consent, then such indemnifying party shall provide the
Indemnified Party reasonable assurances that it shall honor the indemnification
provisions of this Section 5.02. The provisions of this Section 5.02 are
intended for the benefit of, and shall be enforceable by, the respective
Indemnified Parties and their respective heirs and legal
42
representatives and shall not be deemed exclusive of any other rights to which
an Indemnified Party is entitled, whether pursuant to law, contract or
otherwise.
(h) Purchaser shall, or shall cause the Company to, maintain in effect
for not less than six (6) years after consummation of this Agreement the current
policies of directors' and officers' liability insurance maintained by the
Company on the date hereof; provided that Purchaser may substitute therefor
policies having at least the same coverage and containing terms and conditions
which are no less advantageous to the persons currently covered by such policies
and with carriers comparable in terms of creditworthiness, with respect to
matters existing or occurring at or prior to the Closing Date.
(i) In the event that the Company or Purchaser or any of their
respective successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers or conveys all or substantially
all of its properties and assets to any person, then, and in each such case,
proper provision shall be made so that the successors and assigns of the Company
or Purchaser or any such person, as the case may be, shall succeed to the
obligations set forth in this Section 5.02 and in Section 5.05.
(j) The provisions contained in this Section 5.02 shall survive the
Closing.
5.03 EXPENSES. (a) Except as expressly provided otherwise in this
Agreement, all costs and expenses incurred in connection with this Agreement and
the consummation of the transactions contemplated hereby shall be paid by the
party incurring such costs.
(b) The reasonable financial advisory fees of GS&Co. in connection with
the transactions contemplated hereby and the reasonable professional fees and
expenses of Xxxxxxx Xxxxxxx and Xxxxx Xxxxxxx Xxxx Xxxxxx & Xxxxxxx LLP ("Xxxxx
Xxxxxxx"), and Deloitte & Touche LLP ("D&T"), counsel and auditors,
respectively, to the Company in connection with the transactions contemplated
hereby (collectively, "Transaction Fees") shall be paid by Purchaser at Closing
and shall be credited, dollar-for-dollar, against the Base Purchase Price as
provided in Section 1.02(a)(i).
(c) The parties acknowledge that Xxxxxxx Xxxxxxx, Xxxxx Xxxxxxx and D&T
have done and continue to do work for the Company that is unrelated to the
transactions contemplated hereby.
43
5.04 RESIGNATIONS. On the Closing Date, Sellers shall cause all
directors of the Company and its Subsidiaries to resign, shall cause all
officers of such Subsidiaries that are not employees of the foregoing to resign
as officers of the foregoing and shall cause all officers and employees of the
Company (but not the Subsidiaries) to resign. Any severance payments to such
officers and employees shall be made by the Company immediately prior to the
Closing.
5.05 INTERIM MANAGEMENT AGREEMENT. At the election of Purchaser made
prior to the Closing, Sellers shall form an independent management company and
Purchaser, the Company and Sellers shall negotiate, in good faith, an interim
management agreement (the "Interim Management Agreement") pursuant to which, the
management company shall become the employer of record of the Company's
employees and shall manage the Company Real Properties. The Interim Management
Agreement, which may be applicable to some or all of the properties owned by the
Company and its Subsidiaries, shall provide for a nine (9) month term,
terminable on Purchaser's seventy-five (75) days' prior written notice, a
monthly management fee of 2% of revenue plus reimbursement of direct overhead
and sales market costs, an indemnity for all Losses arising out of or relating
to the manager's actions or inactions under the Interim Management Agreement,
except that Purchaser shall not be responsible to indemnify the manager for the
gross negligence or willful misconduct of the manager's corporate personnel or
the general manager of each property until such time as the manager shall have
sustained such Losses for gross negligence and willful misconduct in an amount
equal to or in excess of the aggregate management fees actually received during
the term of the Interim Management Agreement and such other terms and conditions
customary in management transactions of this type. This Section 5.05 shall
survive the Closing.
5.06 REAL ESTATE. (a) Except as otherwise permitted under Section 5.11,
neither the Company, nor any Subsidiary, shall amend, modify or terminate the
Emerald Point Lease or any Material Real Property Contracts, Space Leases or
Membership Documents, or enter into new Material Real Property Contracts, Space
Leases or Membership Documents, in each case without Purchaser's consent, except
(i) in the ordinary course of business, (ii) with respect to any amendment,
modification or termination or new Material Real Property Contracts, Space
Leases or Membership Documents that would not, individually or in the aggregate,
reasonably be likely to result in a liability in excess of Twenty Million
Dollars ($20,000,000),
44
(iii) with respect to the transfer of the Transferred Real Property and the
interests of JV Affiliates to the Company or a wholly owned Subsidiary, provided
that, in the case of this clause (iii), none of Purchaser, the Company or such
Subsidiary shall have any obligations or liabilities to the transferors in
respect of such transfers after Closing, (iv) for the termination or assignment
of the lease for the Company HQ (as more particularly described in Section
5.06(g) below) or (v) for the transfer of the Excluded Real Properties; provided
that, in the case of this clause (v), except as provided in Section 5.06(c),
none of Purchaser, the Company or any applicable Subsidiary of the Company shall
have any obligations or liabilities to the transferee in respect of such
transfers following such transfer.
(b) Purchaser acknowledges and agrees that upon the Closing, the
Company or certain Subsidiaries will continue to own the Excluded Real
Properties, which have not been legally subdivided from other Company Real
Property.
(c) Purchaser further agrees that, upon its receipt of written notice
from one or more Sellers requesting a conveyance of an Excluded Real Property (a
"Conveyance Notice"), Purchaser shall promptly use commercially reasonable
efforts, with the cooperation and at the cost of Sellers or their affiliates, to
cause such Excluded Real Property to become a separate, legally subdivided
parcel, and to become a separate and distinct tax lot, in each case under all
applicable Laws. Sellers shall reimburse Purchaser or the Company for all costs
and expenses incurred by Purchaser or the Company in connection with such
subdivision process; provided that Purchaser or the Company shall obtain
Sellers' prior written consent before incurring any expenses in excess of Fifty
Thousand Dollars ($50,000) and further provided that Purchaser shall have no
obligation to subdivide or convey any Excluded Real Properties in the event
Sellers do not consent to payment of such costs and expenses incurred by
Purchaser or the Company in connection with such subdivision process. Sellers
shall have the right to withdraw any Conveyance Notice at any time, and
Purchaser shall cease efforts for subdividing the Excluded Real Property covered
by such Conveyance Notice immediately after such withdrawal. Notwithstanding
anything above to the contrary, Purchaser shall have no obligations under this
Section 5.06(c) with respect to an Excluded Real Property (i) if Sellers have
not delivered to Purchaser a Conveyance Notice for such Excluded Real Property
within six (6) months from the Closing Date or (ii) if the applicable governing
authority fails or refuses to approve the separation or subdivision of any
Excluded Real Property into a separate distinct tax lot by the
45
date six (6) months from the Closing Date or (iii) if any required consent or
approval for the transfer of the Excluded Real Property is not obtained by
Purchaser, using reasonable efforts, by the date six (6) months from the Closing
Date under financing for the Company and its Subsidiaries that exist prior to
the Closing Date.
(d) Promptly after an Excluded Real Property becomes a separate legally
subdivided parcel and tax lot in accordance with Section 5.06(e), in
consideration of One Hundred Dollars ($100) to be paid by Sellers to Purchaser,
Purchaser shall convey fee simple title to such Excluded Real Property to
Sellers (or Sellers' designees, as requested by Sellers), free and clear of any
Liens or other title exceptions except for those title exceptions on such
Excluded Real Property existing on the Closing Date. At the closing of such
conveyance to Sellers (or Sellers' designees), Purchaser shall deliver a quit
claim deed, a certificate of non-foreign status, required transfer tax forms,
evidence of authorization and such other documents customarily delivered by a
seller of real estate similar to the Excluded Real Property. Sellers shall pay
all real property transfer taxes payable in connection with such conveyance, and
shall reimburse Purchaser or the Company for all costs and expenses incurred by
Purchaser or the Company in connection with such conveyance.
(e) If as of the Closing Date the Company or any Subsidiary has a
written agreement relating to the sale of an Excluded Real Property (including
an option) and such Excluded Real Property is sold or an option thereon is
exercised after the Closing, Purchaser shall cause the proceeds of such sale or
option to be held by the Company or such Subsidiary in trust for Sellers, the
Management Stockholders and the Optionholders, and Purchaser shall further cause
such proceeds to be promptly remitted to Sellers, the Management Stockholders
and the Optionholders to be distributed pro rata (in a manner consistent with
such person's Percentage Share). The Company covenants not to, and to cause its
Subsidiaries not to, enter into any contract for the sale of an Excluded Real
Property which would provide for a closing (including any options) later than
six (6) months following Closing Date or impose any obligation on the Company or
its Subsidiaries after the Closing other than to convey fee simple title to the
Excluded Real Property to the person(s) designated by Sellers pursuant to a
quit-claim deed, and to hold and remit the proceeds of such sale as contemplated
in the immediately preceding sentence of this Section 5.06(e).
46
(f) The provisions of Sections 5.06(b), (c) and (d) shall run with the
Excluded Real Properties. At the Closing, at Sellers' election, Sellers and
Purchaser shall record memoranda in the appropriate land records with respect to
any Excluded Real Properties evidencing the provisions of Sections 5.06(b), (c)
and (d), in a form reasonably satisfactory to Sellers and Purchaser.
Notwithstanding any provision herein to the contrary, Purchaser shall have no
obligations under Section 5.06(c), (d) or (e) after date that is six (6) months
from the Closing Date.
(g) Purchaser acknowledges and agrees that the Company's headquarters
(the "Company HQ") is currently leased by the Company from Landaq, Inc. (the
"Company HQ Landlord"), an affiliate of the Company (the "Company HQ Lease") and
prior to the Closing, the Company will assign the Company HQ Lease to an
affiliate of Sellers or another third party. The parties shall negotiate in good
faith to provide Purchaser with space at the Company HQ for the purpose of
storing the Company's files at no cost, other than reimbursement for rent paid
for such space at the Company HQ, if any, and with no liability to any person
other than for gross negligence and willful misconduct. Prior to the Closing,
the Company will use reasonable efforts to identify any proprietary equipment or
software located at the Company HQ that is required to operate the businesses of
the Company and its Subsidiaries and to use reasonable efforts to cooperate with
Purchaser in transitioning from any such equipment or software. The Company or a
Subsidiary uses the financial reporting system at the Company HQ in connection
with business of the Company and its Subsidiaries. Within six (6) months from
the Closing Date, Purchaser shall sell to an affiliate of Sellers designated by
Sellers, for One Dollar ($1.00), all of the personal property and rights owned
by the Company or any Subsidiaries and used primarily or exclusively at the
Company HQ prior to the Closing (including the financial reporting system
referred to in the previous sentence). After the Closing and until the
consummation of the sale contemplated by the preceding sentence, Purchaser shall
allow affiliates of Sellers designated by Sellers (without any additional cost
or liability to Sellers or their affiliates) to use and shall provide (or cause
to be provided) the full benefit of all such personal property and rights to the
extent enjoyed by the Company or the Subsidiaries at the Company HQ prior to the
Closing.
(h) Purchaser acknowledges and agrees that, as of the date hereof, the
Company (or certain Subsidiaries) only have a partial ownership interest in the
following three
47
Owned Real Properties: (i) the Bye Hole Area (as described on Exhibit F), (ii)
Private Club Tennis and Parking (as described on Exhibit G) and (iii) Mountain
Land Adjacent to Ranch Property (as described on Exhibit H), (the "JV
Properties"), and that the remaining ownership interests in such JV Properties
are owned by affiliates of the Company (the "JV Affiliates"). Prior to the
Closing, the Company or its Subsidiaries shall purchase with cash the remaining
ownership interests in the JV Properties from the JV Affiliates. The conveyance
of such ownership interests in the JV Properties from the JV Affiliates shall be
free of any lien or encumbrance other than Permitted Exceptions. The
representations and warranties contained in Section 3.20 are hereby deemed
amended to reflect the facts set forth in this Section 5.06(h), and no breach of
the representations and warranties contained in Section 3.20 shall be deemed to
have occurred as a result of the facts set forth in this Section 5.06(h), or as
a result of the purchase of the ownership interests of the JV Affiliates in the
JV Properties.
(i) Purchaser acknowledges and agrees that, as of the date hereof,
neither the Company nor its Subsidiaries owns the PGA West Tournament Clubhouse
Parking Lot (as described on Exhibit I), the Model Home Parking Lot (as
described on Exhibit J) or the Desert Resorts Off-Site Employee Parking Lot (as
described on Exhibit K). Prior to the Closing, the Company or its Subsidiaries
shall purchase with cash the PGA West Tournament Clubhouse Parking Lot, the
Model Home Parking Lot and the Desert Resorts Off-Site Employee Parking Lot. The
representations and warranties contained in Section 3.20 are hereby deemed
amended to reflect the facts set forth in this Section 5.06(i), and no breach of
the representations and warranties contained in Section 3.20 shall be deemed to
have occurred as a result of the facts set forth in this Section 5.06(i) or as a
result of the purchase of the PGA West Tournament Clubhouse Parking Lot and the
Model Home Parking Lot and the Desert Resorts Off-Site Employee Parking Lot.
(j) The provisions of this Section 5.06 shall survive the Closing
5.07 FURTHER ASSURANCES. (a) Purchaser and each Seller shall execute
such documents and other papers and take such further actions as the other party
may reasonably request in order to carry out the provisions hereof and the
transactions contemplated hereby, including to obtain any consents from any
party to any Material Contract which is required in connection with the
transactions contemplated hereby; provided that the failure of Sellers or the
48
Company to obtain any such consent shall not be a breach of this Agreement so
long as the Company exercises reasonable efforts to obtain such consent.
(b) Purchaser shall reimburse the Company for commercially reasonable
required payments necessary to obtain the written consent, waiver or approval
required pursuant to Section 5.07(a); provided that Purchaser may instruct the
Company not to pursue certain consents in which case the Company shall not be in
breach of this Agreement for failing to pursue such consents.
5.08 CORRESPONDENCE. Each party shall promptly remit to the other party
any correspondence or amounts received by it which properly belong to the other
party. This Section 5.08 shall survive the Closing.
5.09 RECORD RETENTION. Purchaser shall maintain the agreements,
documents, books, records and files relating to the Company and its Subsidiaries
(collectively, "Records") for a period of six (6) years following the Closing
Date. From and after the Closing Date, upon reasonable written notice, the
Company shall furnish or cause to be furnished to Sellers and their
representatives, employees, counsel and accountants access, during normal
business hours and upon reasonable prior written notice, Records relating to the
Company and its Subsidiaries for periods prior to the Closing Date, and shall
permit Sellers to examine and copy, at such Seller's sole cost and expense, such
Records to the extent reasonably requested by the other party as is reasonably
necessary for financial reporting and accounting matters, the preparation and
filing of any returns, reports or forms or the defense of any claim or
assessment. The parties agree to cooperate so that such access does not
unreasonably disrupt the normal operations of Purchaser or the Company and its
Subsidiaries. This Section 5.09 shall survive the Closing.
5.10 REGULATORY AND OTHER AUTHORIZATIONS. (a) Subject to paragraphs (b)
and (c) below, Purchaser and each Seller shall use its best efforts to obtain
all governmental authorizations of any Governmental Authority that is or may
become necessary for their respective execution and delivery of, and the
respective performance of their obligations pursuant to, this Agreement.
(b) In addition, if any Governmental Authority shall have issued an
order, decree, ruling or injunction, or taken any other action related to the
Company or any Subsidiary,
49
on the one hand, or Purchaser, on the other hand, that would have the effect of
restraining, enjoining or otherwise prohibiting or preventing the consummation
of the transactions contemplated by this Agreement, such party that is the
subject of the order, decree, ruling, etc. shall use its best efforts to have
such order, decree, ruling or injunction or other action declared ineffective as
soon as practicable.
(c) Other than to the extent applicable Law expressly requires Sellers
or the Company to obtain any license, permit, consent, approval, authorization
or order of any state Governmental Authority or to make any registration or
filing with any state Governmental Authority, Purchaser shall be responsible for
making all filings and giving all notices relating to, and otherwise pursuing
all licenses, permits, consents, approvals, authorizations and orders of state
Governmental Authorities and making all registrations and filings with state
Governmental Authorities (collectively, the "State Governmental Consents"),
which, to the knowledge of Purchaser, are required in connection with the
transactions contemplated hereby and shall provide a copy of any such filings or
notices to Sellers and the Company. Purchaser shall be responsible for obtaining
or making all State Governmental Consents required to be obtained or made
subsequent to the Closing Date. In connection with and as a condition to
Purchaser's obligations under the preceding sentence, the Company shall use its
best efforts to fully cooperate with and assist Purchaser in identifying and
obtaining or making all such State Governmental Consents. Purchaser shall pay
all fees in connection with any filings with, or the obtaining of any consents,
approvals or exemptions from, any Governmental Authority in connection with the
consummation of the transactions contemplated hereby; provided, however, that in
connection with any license, permit, consent, approval, authorization or other
of any state Governmental Authority or registration or filing with any state
government that Sellers or the Company are obligated to obtain, Purchaser shall
only be required to reimburse them for commercially reasonable fees they incur.
5.11 CONDUCT OF BUSINESS PENDING THE CLOSING. (a) Except as may be
otherwise contemplated by Schedule 5.11(a) or elsewhere in this Agreement or as
required by any Law or any agreements or arrangements disclosed on any Schedule
or as Purchaser may otherwise consent to in writing (which consent shall not be
unreasonably withheld or delayed), from the date hereof and prior to the Closing
Date, the Company will, and Sellers will cause the Company to, and will cause
the Company to cause each of its Subsidiaries to:
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(i) operate its business only in the ordinary course;
(ii) use commercially reasonable efforts to preserve intact its
business organization and maintain its material rights; and
(iii) use commercially reasonable efforts to preserve their
relationships with their material suppliers and customers.
(b) Without limiting the generality of the foregoing Section 5.11(a),
except as may be otherwise contemplated by Schedule 5.11(a) or elsewhere in this
Agreement or as required by any Law or any agreements or arrangements disclosed
in any Schedule or as Purchaser may otherwise consent to in writing (which
consent shall not be unreasonably withheld or delayed), from the date hereof and
prior to the Closing Date, the Company will not and Sellers will not allow the
Company to, and will not allow the Company to allow any of its Subsidiaries to:
(i) (A) declare, set aside or pay any dividend or other
distribution payable in property (other than Excluded
Properties) or stock (other than stock or other equity interests of KSL Land
Holdings Inc. and Blue View LLC) in respect of any of its capital stock (except
for dividends paid by the Subsidiaries), (B) split, combine or reclassify any of
its capital stock or issue any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or amend the terms of any of its
securities or (C) directly or indirectly redeem, purchase or otherwise acquire
any of its equity securities with property or stock;
(ii) authorize for issuance, issue, sell, deliver (whether through
the issuance or granting of options, warrants, commitments, subscriptions,
rights to purchase or otherwise) any stock of any class or any other voting
securities (including indebtedness having the right to vote) or equity
equivalents (including stock options and stock appreciation rights) other than
(A) issuances pursuant to the exercise of Company Stock Options granted to
employees and former employees prior to the date of this Agreement and (B)
grants of stock and options to employees permitted by this Agreement, or amend
in any respect any of the terms of any such securities or equity equivalents
outstanding on the date hereof;
(iii) amend its certificate of incorporation or by-laws or
equivalent organizational documents;
(iv) sell, lease, transfer, mortgage, pledge, encumber or dispose
of any assets that are material to the Company and the Subsidiaries, taken as a
whole, or make any
51
material capital expenditures, except, in each case, (A) in the ordinary course
of business, (B) pursuant to any Material Contract in effect on the date hereof,
(C) for Permitted Exceptions, (D) the transfer of the name "KSL" and domain
names containing the name "KSL", (E) sales of the Excluded Real Properties, (F)
real estate sales in the ordinary course of business consistent with past
practice, (G) the transfer of the stock or other equity interests of KSL Land
Holdings, Inc. without residual liabilities to the Company or receipt of
additional property by the Company or the Subsidiaries and (H) personal property
located at the Company headquarters;
(v) make any commitments for capital assets or acquisitions of
real property in excess of One Hundred Thousand Dollars ($100,000) after the
Closing;
(vi) except for indebtedness for borrowed money (including letters
of credit) in the ordinary course of business under the Credit Agreement, incur
or assume any indebtedness for borrowed money or guarantee any such indebtedness
or issue or sell any debt securities or warrants or rights to acquire any debt
securities of the Company or any of the Subsidiaries or guarantee (or become
liable for) any indebtedness for borrowed money of others;
(vii) make any loans, advances or capital contributions material
to the Company and the Subsidiaries, taken as a whole, outside of the ordinary
course of business, except to any of the Subsidiaries;
(viii) except as may otherwise be required by applicable law or
regulation, GAAP or the Financial Accounting Standards Board, (A) change any of
the accounting principles, or otherwise accrue any deferred tax asset relating
to net operating losses resulting from or in connection with the transactions
contemplated hereby, or practices used by it in any material respect or (B) make
any material tax election except in the ordinary course of business;
(ix) except (1) to the extent required under the terms of the
applicable plan or arrangement or any employment agreement or severance
arrangement as in effect on the date hereof and consistent with past practice,
(2) in the case of newly hired officers or employees to the extent consistent
with past practice, (3) in the case of promotions to fill vacated positions to
the extent consistent with past practice, (4) as a result of collective
bargaining, (5) as required by applicable law or (6) as contemplated by Section
1.04: (A) enter into, adopt, amend or terminate any Plan or any agreement,
arrangement, plan or policy between itself and one or more of its directors or
executive officers, (B) increase in any manner the compensation or fringe
52
benefits of any director, officer or employee except, in the case of officers
and employees, for normal increases in compensation in the ordinary course of
business or (C) pay or provide for any severance payment;
(x) dissolve, liquidate, recapitalize or merge or consolidate with
or into any other person or engage in any other material reorganization;
(xi) engage in any transaction with any affiliate (including
either of Sellers or their affiliates (but excluding the Company and any
Subsidiary)) other than transactions permitted by this Agreement or pursuant to
Section 3.17 or Section 5.06;
(xii) commence any litigation or other legal proceeding other than
in the ordinary course of business or settle any litigation or other legal
proceeding for material money damages or restrictions upon the operations of the
Subsidiaries;
(xiii) materially amend or terminate or waive compliance with the
terms of or breaches under, any Material Contract, or enter into a new contract
or agreement or arrangement that would constitute a Material Contract; provided
that the foregoing shall not be deemed to limit or restrict the ability of the
Company or any of its Subsidiaries to enter into, as appropriate, membership,
marketing, development, licensing and hotel amenities agreements for the benefit
of Parcel A of the Blue View at Doral and other properties currently owned by
affiliates of the Company on market terms and in forms substantially similar to
agreements heretofore entered into by the Company or its Subsidiaries with third
parties; and no breach of the representations and warranties contained in
Section 3.13 shall be deemed to have occurred as a result of the Company or its
Subsidiaries entering into any such agreements;
(xiv) fail to maintain ordinary and customary levels of
inventories with respect to food, liquor/wine, beverages, linens, china,
crystal/barware and silverware at each of the Company Real Properties,
consistent with past practice; or
(xv) agree to take any of the foregoing actions.
(c) Notwithstanding anything to the contrary in this Section 5.11,
affiliates of Sellers shall not enter into the agreements or arrangements set
forth on Schedule 5.11(c) without the prior written consent of Purchaser, which
consent shall not be unreasonably withheld or delayed.
5.12 NO DISCLOSURE. Except as set forth in this Section 5.12, Purchaser
and each Seller agree that it shall not make any public announcement or issue
any press release in
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connection with the transactions consummated hereby, except as provided in this
Section 5.12 and except if Purchaser or any Seller (i) is ordered to make such
disclosure by a court of competent jurisdiction or (ii) is advised by legal
counsel that such disclosure is required under applicable laws or the rules and
regulations of any stock exchange upon which Purchaser's or any Seller's
securities are traded, in which case the party making the required disclosure
shall inform the other party as to the timing and contents of such disclosure
prior to making such disclosure. Purchaser and Sellers shall jointly agree upon
and approve one or more press releases (which need not be joint press releases)
to be issued on or about the date hereof and/or on or about the Closing Date, as
mutually determined by the parties hereto. Any subsequent press release or
public announcement made by either party hereto after approval of any such press
release shall be consistent with (including in scope) the mutually agreed upon
press release or releases. Purchaser and its affiliates shall use reasonable
efforts to confer with the Company and Sellers in good faith regarding any
disclosure, in writing, to the Securities and Exchange Commission regarding
Sellers, the Company, the subject matter hereof or the transactions contemplated
hereby within a reasonable period of time prior to making any such disclosure.
This Section 5.12 shall survive the Closing.
5.13 TRANSFER TAXES. Purchaser shall pay any state or local sales,
transfer or like Taxes payable in connection with the transactions contemplated
hereby (other than such Taxes related to the transfer of the Transferred Real
Property or the interests of the JV Affiliates in the JV Properties to the
Company or its Subsidiaries and the transfer of the Excluded Real Properties to
Sellers or their designees). This Section 5.13 shall survive the Closing.
5.14 REASONABLE EFFORTS TO CLOSE. During the period commencing on the
date of execution of this Agreement and continuing until the Closing Date,
Purchaser and Sellers shall use their respective reasonable efforts to
consummate the transactions contemplated hereby.
5.15 ACCESS TO THE COMPANY AND ITS SUBSIDIARIES. (a) Prior to the
Closing Date, Purchaser shall be entitled, through its employees and
representatives, to make such reasonable investigation of the assets,
properties, liabilities, business and operations of the Company and its
Subsidiaries as Purchaser may reasonably request. Any such investigation shall
be conducted at reasonable times, on prior reasonable notice, and under
reasonable
54
circumstances. Any disclosure whatsoever during such investigation by Purchaser
shall not constitute any enlargement or additional representations or warranties
of Sellers beyond those specifically set forth in this Agreement. All such
information and access shall be subject to the terms and conditions of the
Confidentiality Agreement, dated November 12, 2003, executed by Purchaser (the
"Confidentiality Agreement"). The Confidentiality Agreement shall terminate upon
the Closing.
(b) Prior to the Closing Date, Purchaser and Sellers shall promptly
advise each other orally and in writing of any change or event which has caused,
or could reasonably be expected to have caused or to cause, a breach of a
representation, warranty or covenant contained in this Agreement. Sellers and
the Company shall promptly provide Purchaser with copies of all filings made by
the Company, its Subsidiaries, or Seller, with or any other state or federal
Governmental Authority in connection with this Agreement, or the transactions
contemplated hereby.
5.16 SECTION 280G OF THE CODE. Prior to the Closing, the Company shall
(i) use best efforts to provide the shareholders of the Company with adequate
disclosure, within the meaning of Section 280G(b)(5)(B)(ii) of the Code and the
Treasury Regulations promulgated thereunder, of all material facts concerning
the payments of certain employees of the Company, (ii) obtain approval of such
payments in a manner which satisfies the requirements of Section
280G(b)(5)(B)(i) of the Code and the Treasury Regulations promulgated
thereunder, and (iii) provide evidence to the Purchaser of its compliance with
the requirements of this Section 5.16, provided that the Company shall be deemed
to have satisfied the requirement that disclosure be provided to its
shareholders if the Company uses best efforts to determine the last known
mailing address of each such shareholder, properly sends such disclosure to each
such shareholder at such address by certified mail, return receipt requested or
other similar method, and with respect to any shareholder for whom a delivery
receipt is not obtained, uses best efforts to locate such shareholder and
provide it with the referenced disclosure, provided, however, that such efforts
will not cure a defect in the adequacy of the disclosure itself, and provided
further that "shareholder" shall include any person treated as a shareholder
under either the applicable Treasury Regulations or general principals of
federal income tax laws. For purposes of the foregoing, the Company represents
that (a) the general partner of each of the shareholders which are entities
(each, an "Entity Shareholder"), is not a "disqualified individual", (b) the
stock of the
55
Company represents a "substantial portion" of the assets of each such Entity
Shareholder, and (c) none of the limited partners of any of the Entity
Shareholders are entitled to vote on issues involving the management of the
respective Entity Shareholder's investments pursuant to the operative provisions
of the respective Entity Shareholder's governing documents or otherwise, each
within the meaning of Section 280G of the Code and the Treasury Regulations
thereunder, and each of the Company and the Purchaser agree that the
determination of who is a "shareholder" under the applicable Treasury
Regulations and general principals of federal income tax laws shall be subject
to the determination of both the Company and the Purchaser.
5.17 FINANCING. Purchaser shall not take any action between the date of
this Agreement and the Closing Date that would reasonably be expected to make
the Financing unavailable for any reason. Purchaser shall use its reasonable
efforts to enter into definitive documentation with respect to the Financing.
Without limiting the generality of the preceding sentence, Purchaser shall use
its reasonable efforts to negotiate and finalize definitive loan documentation
for the Financing. Purchaser shall keep Sellers and the Company reasonably
informed as to the status of the Financing.
5.18 NON-COMPETITION AGREEMENT. For so long as a management company
affiliated with any of the Sellers has a management contract with Purchaser or
its servicer to manage the Grand Wailea Hotel, then none of Sellers or their
affiliates shall, directly or indirectly, manage or own the properties known or
formerly known as the "Four Seasons Hotel Maui--Wailea" or "Ritz Carlton
Hotel--Kapalua" (other than a passive investment in less than 10% of the equity
of a publicly traded company) or any equity interest in any person who owns the
"Four Seasons Hotel Maui--Wailea" or "Ritz Carlton Hotel--Kapalua" (other than a
passive investment in less than 10% of the equity of a publicly traded company).
This Section 5.18 shall survive the Closing.
5.19 GUEST DATA AND DATABASE. Purchaser and Sellers agree that the
parties are equal co-owners of all Data. For five (5) years from and after the
Closing Date, Sellers agree not to transfer or license the Data to any person,
other than: (a) a person, directly or indirectly, controlling, controlled by or
under common control with any Seller, (b) in connection with the transfer of
real estate (regardless of the structure of the transaction, whether it is a
sale of stock
56
or assets) relating to any portion of the Data, (c) in connection with the
transfer of management rights relating to any portion of the Data, (d) in
connection with a "data exchange" or otherwise for a use outside of the lodging
industry (e.g. MasterCard and Starbucks partnerships). "Data" means (a) all data
and information owned by the Company or any of its Subsidiaries on the Closing
Date concerning or relating to guests of resorts owned, operated and/or managed
by the Company and its Subsidiaries and (b) all such data and information
collected after the Closing Date during the term of the Interim Management
Agreement. Purchaser and Sellers further agree that Sellers shall have the right
to retain copies of the Data. As of the Closing Date, Purchaser and Sellers
shall have no continuing obligation to provide each other with any updates to
the Data after the Closing Date and any such updates will be owned and will
remain in the possession, custody and control of the respective party who
develops them. Purchaser and Sellers agree to cooperate to take all necessary
actions to comply with all laws, regulations, rules and directives of the United
States concerning the Data, including any of the foregoing relating to data
privacy. Purchaser acknowledges that the technology and software used at the
Company HQ in connection with Data (or the right to use such technology and
software) shall be owned by Sellers (or an affiliate of a Seller) from and after
the Closing. This Section 5.19 shall survive the Closing.
5.20 EMPLOYEE HIRING ASSISTANCE. Prior to Closing, the Company and
Purchaser shall in good faith identify persons who could be eligible for hire by
the Purchaser, its advisors, property manager or other service provider to
perform services for Purchaser after the Closing.
5.21 TRANSFER OF BLUE VIEW II LLC. Prior to Closing, the Company shall
transfer its limited liability interests, which shall be all of the interests in
Blue View II LLC, to an entity not owned, directly or indirectly, in whole or in
part, by the Company or a Subsidiary (other than KSL Land Holdings if KSL Land
Holdings is not then a Subsidiary of the Company). Such transfer shall not
result in any liabilities to the transferor. None of the Company and
Subsidiaries will be the record owner of interests in Blue View II LLC at
Closing.
5.22 La Quinta Declarations. (a) Prior to Closing, Sellers and the
Company shall cause each Declarant (as hereafter
57
defined) under the La Quinta Declarations (as hereafter defined) to assign such
Declarant's rights under the La Quinta Declarations to KSL Desert (as hereafter
defined) at or prior to Closing if such Declarant's rights are assignable. For
purposes of this Agreement, "La Quinta Declarations" shall mean any and all
declarations, covenants, restrictions or similar agreements encumbering the La
Quinta Resort Property. "Declarant" shall mean any affiliate or subsidiary of
Sellers who is a "Declarant," as otherwise defined in the La Quinta
Declarations, or who otherwise has any approval rights over (i) assessments
imposed against the property encumbered by the La Quinta Declarations, (ii) the
use or operation of the property encumbered by the La Quinta Declarations,
including use restrictions, (iii) the aesthetics, design, construction or
maintenance of any improvements located on any property encumbered by the La
Quinta Declaration or (iv) any amendment to a La Quinta Declaration. "KSL
Desert" shall mean KSL Desert Resorts, Inc.
(b) If such Declarant's rights are not assignable, Sellers shall cause
the Declarant not to take any action that would be adverse to the interests of
KSL Desert without the prior written consent of Purchaser, which shall not be
unreasonably withheld, and to consult with KSL Desert on all matters that
require Declarant's consent or approval. This Section 5.22(b) shall survive the
Closing.
ARTICLE VI. CONDITIONS TO CLOSING.
6.01 CONDITIONS TO CLOSING. (a) The obligation of Purchaser to
consummate the transactions contemplated hereby is subject to the fulfillment
(or waiver by Purchaser), as of the Closing Date, of each of the following
conditions:
(i) The representations and warranties of Sellers and the Company
contained herein, other than Section 3.07, Section 3.19(a)(iii) and the last
sentence of Section 3.14(c) (after taking into account the knowledge qualifier),
shall be true and correct in all respects, in each case as of Closing Date
(unless by their terms they relate to an earlier date, in which case such
representations and warranties shall be true and correct as of such earlier
date); except to the extent the failure of such representations and warranties
to be true and correct would not be reasonably likely to result in aggregate
Losses in excess of Fifteen Million Dollars ($15,000,000) (after taking into
account all materiality qualifications, knowledge qualifiers and baskets);
58
(ii) Sellers shall have performed and complied in all material
respects with all covenants, obligations and undertakings required by this
Agreement to be performed or complied with on or prior to the Closing Date;
(iii) Since the date hereof, there shall have been no event or
occurrence that has had a Material Adverse Effect; and
(iv) No event or occurrence which would be reasonably likely to
cause a Material Adverse Effect exists.
(b) The obligation of Sellers to consummate the transactions
contemplated hereby is subject to the fulfillment (or waiver by Sellers), as of
the Closing Date, of each of the following conditions:
(i) The representations and warranties of Purchaser contained
herein shall be true and correct in all respects, in each case, as of the
Closing Date (unless by their terms they relate to an earlier date, in which
case such representations and warranties shall be true and correct as of such
earlier date); except to the extent the failure of such representations and
warranties to be true and correct would not be reasonably likely to result in
aggregate Losses in excess of Fifteen Million Dollars ($15,000,000) (after
taking into account all materiality qualifications, knowledge qualifiers and
baskets); and
(ii) Purchaser shall have performed and complied in all material
respects with all covenants, obligations and undertakings required by this
Agreement to be performed or complied with on or prior to the Closing Date.
(c) The obligations of Purchaser and Sellers to consummate the
transactions contemplated hereby is subject to the fulfillment (or wavier by
Purchaser), as of the Closing Date, of the following condition:
(i) No judgment, order or decree shall have been rendered which
has the effect of enjoining the consummation of the transactions contemplated
hereby.
6.02 DOCUMENTS TO BE DELIVERED BY SELLERS AND THE COMPANY. At the
Closing, Sellers and the Company shall deliver to Purchaser the following:
(a) the certificates representing all of the Seller Shares, together
with appropriate stock powers attached and duly executed, and certificates
representing all of the Subsidiary Shares;
59
(b) copies of all letters, agreements or instruments presented pursuant
to Section 1.04(c) as of the Closing Date;
(c) a certificate of the general partner of each Seller, dated the
Closing Date, stating that the execution, delivery and performance of this
Agreement by such Seller was and is at such date duly authorized, and setting
forth the incumbency of each person executing this Agreement, or any document
required by this Section 6.02 on behalf of such Seller;
(d) a copy of resolutions or other action adopted by the Company
authorizing the execution, delivery and performance of this Agreement as
appropriate, and a certificate of the Company, dated the Closing Date, stating
that such resolutions or other action were duly adopted and are in full force
and effect at such date, and setting forth the incumbency of each person
executing this Agreement, or any document required by this Section 6.02 on
behalf of the Company;
(e) a certificate executed by an officer of the Company setting forth
the truth and accuracy of the matters set forth in Sections 6.01(a)(i) and
6.01(a)(ii) hereof with respect to matters pertaining to the Company;
(f) a certificate executed by the general partner of each Seller
setting forth the truth and accuracy of the matters set forth in Sections
6.01(a)(i) and 6.01(a)(ii) hereof with respect to matters pertaining to such
Seller;
(g) the minute books, corporate seal, stock transfer books and records
for the Company and each Subsidiary;
(h) the resignations referred to in Section 5.04;
(i) a certificate or certificates in form and substance reasonably
satisfactory to Purchaser certifying that the purchase and sale of the Shares
under this Agreement are exempt from withholding under Section 1445 of the Code;
(j) the Trademark License Agreement substantially in the form of
Exhibit A; and
(k) the Escrow Agreement substantially in the form of Exhibit B.
6.03 DOCUMENTS TO BE DELIVERED BY PURCHASER. At the Closing, Purchaser
shall deliver to Sellers the following:
(a) a copy of resolutions adopted by the Board of Directors for each of
Purchaser and CNL Hospitality Properties, Inc. ("Parent") authorizing the
execution, delivery
60
and performance of this Agreement as appropriate, and a certificate of the
secretary or assistant secretary of Purchaser and Parent, dated the Closing
Date, stating that such resolutions were duly adopted and are in full force and
effect at such date, and setting forth the incumbency of each person executing
this Agreement, or any document required by this Section 6.03 on behalf of
Purchaser or Parent;
(b) a certificate executed by an officer of Purchaser setting forth the
truth and accuracy of the matters set forth in Section 6.01(b)(i) and
6.01(b)(ii) hereof; and
(c) the Escrow Agreement substantially in the form of Exhibit B.
ARTICLE VII. TERMINATION.
7.01 TERMINATION. (a) This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(i) by the mutual written consent of Purchaser and Sellers; or
(ii) by Sellers in writing, delivered at any time without
liability to Sellers on account of such termination (except as otherwise
provided in Section 7.02), if the Closing shall not have occurred on or before
the Closing Date, or by Purchaser in writing delivered at any time without
liability to Purchaser on account of such termination (except as otherwise
provided in Section 7.02) if the Closing shall not have occurred on or before
the Closing Date; provided that, in each case, the right to terminate this
Agreement under this Section 7.01(a)(ii) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Closing of the transactions contemplated
hereby to occur on or prior to such date; and provided further that this
Agreement shall not be terminated during the pendency of any arbitration
pursuant to Section 1.02(d); or
(iii) by Sellers or Purchaser if any permanent injunction or other
order of a Governmental Authority preventing the consummation of the
transactions contemplated hereby in any material respect shall have become final
and non-appealable; or
(iv) by Sellers if there is a breach of Section 3.07 (after taking
into account all materiality qualifications, knowledge qualifiers and baskets),
Section 3.19(a)(iii) (after taking into account all materiality qualifications,
knowledge qualifiers and baskets) or the last sentence of Section 3.14(c) (after
taking into account the knowledge qualifier), in each case, caused by an action,
suit, proceeding or investigation against the Company or any of its
61
Subsidiaries commenced after the date hereof if, such breach, individually or in
the aggregate would reasonably be likely to result in Losses to the Company or
its Subsidiaries in excess of Twenty Million Dollars ($20,000,000); provided
that such termination under this clause (iv) shall not be effective if
Purchaser, within five (5) business days of receipt of written notice from
Sellers indicating Sellers' intention to terminate pursuant to this Section
7.01(a)(iv), gives Sellers notice of its election to close the transactions
contemplated by this Agreement and waives its rights under Section 1.02(d).
(b) The parties hereto acknowledge that the right of any party hereto
to terminate this Agreement pursuant to this Section 7.01 shall remain operative
and in full force and effect regardless of any due diligence investigation made
by or on behalf of any party hereto, any person controlling any such party, or
any of their respective officers, directors, trustees, employees, accountants,
consultants, legal counsel, agents, or other representatives whether prior to or
after the execution of this Agreement.
7.02 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 7.01, written notice thereof shall forthwith be
given to the other parties specifying the provision hereof pursuant to which
such termination is made, and this Agreement shall forthwith become null and
void, and there shall be no liability on the part of Sellers or Purchaser,
except (i) pursuant to Sections 1.03, 7.02, 8.01, 8.03, 8.09 and 8.12, and (ii)
the confidentiality obligations set forth in Section 5.15.
ARTICLE VIII. MISCELLANEOUS.
8.01 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS.
(a) Other than the representations and warranties contained in Sections 3.01(c),
3.03(a), 3.04(b), 3.05(b) and 3.08(b), which representations and warranties
shall survive for six (6) months from the Closing (except with respect to claims
made prior to the end of such period), none of the representations and
warranties in this Agreement or in any schedule, instrument or other document
delivered pursuant to this Agreement shall survive the Closing and, except as
provided in Section 5.02(d), no party hereto shall under any circumstance have
any right or remedies at law or equity, directly or indirectly, prior to or
after the Closing, against any Seller, the Company, Purchaser or any officer,
director, partner, employee, representative or affiliate of any
62
Seller, the Company or Purchaser on account of any misrepresentation or breach
of warranty contained in this Agreement nor shall any Seller, the Company or
Purchaser or any of their respective officers, directors, partners, employees,
representatives or affiliates have any liabilities on account of such
misrepresentation or breach.
(b) If the Company, any Seller or Purchaser breaches any of its
respective covenants or agreements contained in this Agreement to be performed
on or prior to Closing, the non-breaching parties, shall not have any right or
remedies at law or equity, directly or indirectly, against the breaching party,
or any officer, director, partner, employee, representative or affiliate of any
breaching party on account of any such breach, other than the right to terminate
this Agreement pursuant to Section 7.01, the right to keep the Deposit pursuant
to Section 1.03 and the right to specific performance under Section 8.11, as
applicable.
(c) All covenants that are not by their express terms to be performed
on or prior to Closing shall survive the Closing. If Sellers, on the one hand,
or Purchaser, on the other hand, breach any of such covenants after Closing,
Purchaser or Sellers, as the case may be, shall have all remedies at law or
equity, directly or indirectly, against the breaching party on account of any
such breach; provided, however, that no officer, director, partner, employee,
representative or affiliate of any Seller or Purchaser shall have any
liabilities on account of such breach.
(d) Notwithstanding anything to the contrary in this Agreement, no
party hereto shall have any remedies at law or equity, directly or indirectly,
against any officer, director, partner, employee, representative or affiliate of
any other party on account of any misrepresentation or breach, nor shall any
officer, director, partner, employee, representative or affiliate of any party
have any liabilities on account of such breach.
8.02 ENTIRE AGREEMENT. This Agreement (together with the Schedules and
Exhibits hereto and the documents referred to herein) contains, and is intended
as, a complete statement of all of the terms of the arrangements between the
parties with respect to the matters provided for herein, and supersedes any
previous agreements and understandings between the parties with respect to those
matters, provided, however, that the terms of the Confidentiality Agreement
shall remain in full force and effect.
63
8.03 GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL. (a) This
Agreement shall be construed in accordance with and governed by the laws of the
State of New York applicable to agreements made and to be performed wholly
within such jurisdiction. Each of the parties hereto hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of New York and of the United States of America, in each case
located in the County of New York, for any litigation arising out of or relating
to this Agreement and the transactions contemplated hereby (and agrees not to
commence any litigation relating thereto except in such courts), and further
agrees that service of any process, summons, notice or document by U.S.
registered mail to its respective address set forth in Section 8.05 shall be
effective service of process for any litigation brought against it in any such
court. Each of the parties hereto hereby irrevocably and unconditionally waives
any objection to the laying of venue of any litigation arising out of this
Agreement or the transactions contemplated hereby in the courts of the State of
New York or the United States of America, in each case located in the County of
New York, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such litigation brought in any
such court has been brought in an inconvenient forum.
(b) To the fullest extent permitted by law, the parties hereto hereby
waive their respective rights to a jury trial of any claim or cause of action
based upon or arising out of this Agreement or any dealings between them
relating to the subject matter of this transaction. The parties hereto also
waive any bond or surety or security upon such bond which might, but for this
waiver, be required of any of the other parties. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this Agreement, including
contract claims, tort claims, breach of duty claims, and all other common law
and statutory claims. The parties hereto acknowledge that this waiver is a
material inducement to enter into a business relationship, that each has already
relied on the waiver in entering into this Agreement and that each will continue
to rely on the waiver in their related future dealings. The parties hereto
further warrant and represent that each has reviewed this waiver with its or
his, as the case may be, legal counsel, and that each knowingly and voluntarily
waives its jury trial rights following consultation with legal counsel. This
waiver is irrevocable, meaning that it may not be modified either orally or in
writing, and the waiver shall apply to any subsequent amendments, renewals,
supplements or modifications to this Agreement
64
or to any other documents or agreements relating to the transactions
contemplated hereby. In the event of litigation, this Agreement may be filed as
a written consent to a trial by the court.
8.04 AMENDMENT; WAIVER. No provision of this Agreement may be amended
or modified except by an instrument or instruments in writing signed by the
parties hereto; provided that Sellers may amend the percentages in Section
1.02(b) without the consent of Purchaser. Any party may waive compliance by
another with any of the provisions of this Agreement. No waiver of any provision
hereof shall be construed as a waiver of any other provision or subsequent
breach. Any waiver must be in writing. The failure of any party hereto to
enforce at any time any provision hereof shall not be construed to be a waiver
of such provision, nor in any way to affect the validity hereof or any part
hereof or the right of any party thereafter to enforce each and every such
provision.
8.05 NOTICES. All notices and other communications under this Agreement
shall be in writing and shall be deemed given when delivered personally, mailed
by registered mail, return receipt requested, sent by documented overnight
delivery service or, to the extent receipt is confirmed, by telecopy to the
parties at the following addresses (or to such other address as a party may have
specified by notice given to the other party pursuant to this provision):
If to Sellers:
x/x Xxxxxxxx Xxxxxx Xxxxxxx & Co., L.P.
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxx
Xxxx X. Xxxx, Xx.
Phone: 000-000-0000
Fax: 000-000-0000
With a copy to:
KSL Recreation Management Corporation
00-000 Xxxxxxx Xxxxxxxx
Xx Xxxxxx, XX 00000
Attention: Xxxx X. Xxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
65
With a copy to (which shall not constitute notice hereunder):
Xxxxxxx Xxxxxxx & Xxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
and to
Xxxxx Xxxxxxx Xxxx Xxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
If to Purchaser, to it at:
CNL Hospitality Properties, Inc.
CNL Center at City Commons
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxx Xxxxxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
With a copy to (which shall not constitute notice hereunder):
Xxxxxxxxx Xxxxxxx, LLP
The Met Life Building
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
and to
Lowndes, Drosdick, Doster, Xxxxxx & Xxxx, P.A.
000 Xxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx Xxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
66
8.06 SEVERABILITY. If any provision of this Agreement is held by any
court of competent jurisdiction to be illegal, invalid or unenforceable, such
provision shall be of no force and effect as to that jurisdiction, but the
illegality, invalidity or unenforceability shall have no effect upon and shall
not impair the enforceability of any other provision of this Agreement in that
jurisdiction or impair the enforceability of that or any other provision of this
Agreement in that or any other jurisdiction.
8.07 ASSIGNMENT AND BINDING EFFECT. Except as provided in Section 5.06
with respect to Sellers and except as provided in Section 5.02(i), none of the
parties hereto may assign any of its rights or delegate any of its duties under
this Agreement without the prior written consent of the other parties hereto.
All of the terms and provisions of this Agreement shall be binding on, and shall
inure to the benefit of, the respective legal successors and permitted assigns
of the parties.
8.08 NO BENEFIT TO OTHERS. Except as provided in Sections 5.02, 8.01
and 8.09 (the provisions of which Sections shall inure to the benefit of the
person or entities benefiting therefrom who are intended to be third party
beneficiaries thereof), the representations, warranties, covenants and
agreements contained in this Agreement (including Section 1.02(b)) are for the
sole benefit of the parties hereto and their respective successors and permitted
assigns and they shall not be construed as conferring and are not intended to
confer any rights on any other persons.
8.09 NO RECOURSE. Notwithstanding any other provision of this Agreement
or any rights of Purchaser at law or in equity, in the event of any default or
breach by Sellers under this Agreement, Purchaser's remedies shall be restricted
to enforcement of its rights against the partnership property and assets of
Sellers (including Seller Shares) and no resort shall be had to any of the
partners of Sellers personally or to any property and assets of any of the
partners of Sellers (other than partnership property and assets of Sellers).
8.10 ENFORCEMENT. The parties agree that irreparable damage would occur
in the event that any of the provisions
of this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
67
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement.
8.11 SPECIFIC PERFORMANCE. The parties recognize that in the event
Sellers or the Company should refuse to perform under the provisions of this
Agreement, monetary damages alone will not be adequate. Accordingly, Purchaser
shall be entitled, in addition to any other remedies which may be available
against the Company, including money damages, to obtain specific performance of
the terms of this Agreement. In the event of any action to enforce this
Agreement specifically, Sellers and the Company hereby waive the defense that
there is an adequate remedy at law. In no event shall Sellers or the Company be
entitled to seek specific performance with respect to any of Purchaser's
obligations arising under this Agreement.
8.12 COUNTERPARTS. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, and each party thereto
may become a party hereto by executing a counterpart hereof. This Agreement and
any counterpart so executed shall be deemed to be one and the same instrument.
8.12 INTERPRETATION. Article titles, headings to sections and the table
of contents are inserted for convenience of reference only and are not intended
to be a part or to affect the meaning or interpretation hereof. The Schedules
referred to herein shall be construed with and as an integral part of this
Agreement to the same extent as if they were set forth verbatim herein. The
specification of any dollar amount in the representations and warranties
contained in this Agreement or the inclusion of any specific item in any
schedule hereto is not intended to imply that such amounts or higher or lower
amounts, or the items so included or other items, are or are not material, and
no party hereto shall use the fact of the setting of such amounts or the
inclusion of any such item in any dispute or controversy between the parties as
to whether any obligation, item or matter not described herein or included in a
Schedule is or is not material for purposes hereof. As used herein, "include,"
"includes" and "including" are deemed to be followed by "without limitation"
whether or not they are in fact followed by such words or words of like import;
"writing," "written" and comparable terms refer to printing, typing, lithography
and other means of reproducing words in a visible form; references to a "person"
shall be construed broadly and shall include an individual, corporation,
partnership, trust,
68
proprietorship, association, governmental body, agency or subdivision or other
entity, and shall also include its successors and permitted assigns; "hereof,"
"herein," "hereunder" and comparable terms refer to the entirety hereof and not
to any particular article, section or other subdivision hereof or attachment
hereto; references to the masculine include the feminine and vice versa;
references to the singular include the plural and vice versa; references to this
Agreement or other documents are as amended or supplemented from time to time;
references to "Article," "Section" or another subdivision or to an attachment or
"Schedule" are to an article, section or subdivision hereof or an attachment or
Schedule hereto.
8.14 DISCLOSURE. For the purpose of this Agreement, any disclosure made
on one Schedule to this Agreement shall be deemed to be a disclosure for the
purposes of all Schedules to this Agreement. The inclusion of any information on
any Schedule shall not be deemed to be an admission or acknowledgment by
Sellers, in and of itself, that such information is required to be listed on any
Schedule or is material to or outside the ordinary course of the business of the
Company and its Subsidiaries. In addition, "to the knowledge of the Company" or
"to the knowledge of Sellers" or words of similar effect shall mean the actual
knowledge of any of Xxxxxxx Xxxxxxx, Xxxx Xxxxxxx, Xxxxx Xxxxxxx, Xxxxx
Xxxxxxxxx, Xxx Xxxxx, Xxx Xxxxxxxx, Xxxxx Xxx, Xxxx XxXxxxxxx and Xxxxxx So.
8.15 NO PRESUMPTION. The language used in this Agreement will be deemed
to be the language chosen by the parties hereto to express their mutual intent
and there shall be no presumption against the draftsman.
69
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
KKR PARTNERS II, L.P.
By: KKR Associates, L.P., its General Partner
By:/s/Xxxxx Xxxxxx
--------------------------------------------
Name: Xxxxx Xxxxxx
Title: General Partner
KKR 1996 FUND, L.P.
By: KKR Associates 1996 L.P., its General Partner
By: KKR 1996 GP LLC, its General Partner
By:/s/Xxxxx Xxxxxx
--------------------------------------------
Name: Xxxxx Xxxxxx
Title: Member
RESORT ASSOCIATES, L.P.
By: KKR Associates, L.P., its General Partner
By:/s/Xxxxx Xxxxxx
--------------------------------------------
Name: Xxxxx Xxxxxx
Title: General Partner
GOLF ASSOCIATES, L.P.
By: KKR Associates, L.P., its General Partner
By:/s/Xxxxx Xxxxxx
--------------------------------------------
Name: Xxxxx Xxxxxx
Title: General Partner
KSL RECREATION CORPORATION
By:/s/Xxxx Xxxxxxx
--------------------------------------------
Name: Xxxx Xxxxxxx
Title: Chief Financial Officer
CNL RESORT ACQUISITION CORP.
By:/s/Xxxx Xxxxxxxx
--------------------------------------------
Name: Xxxx Xxxxxxxx
Title: President
INDEX OF DEFINED TERMS
TERM PLACE OF DEFINITION
"1996 Fund" Preamble
"1996 Fund Holdback Amount" Section 1.02(a)(i)
"1996 Fund Shares" Preamble
"Accrued Interest" Section 1.03
"Affiliate" Section 3.14(h)(iii)
"Agreement" Preamble
"Xxxxx Xxxxxxx" Section 5.03(b)
"Artwork" Section 3.20(j)
"Audited Financial Statements" Section 3.10(a)
"Base Purchase Price" Section 1.02(a)(i)
"Base Purchase Price Per Share" Section 1.04(a)
"Bye Hole Area" Section 5.06(h)
"Capital Stock Subaccount" Section 1.02(a)(iii)
"Closing" Section 2.01
"Closing Date" Section 1.02(a)(iv)
"Code" Section 3.14(b)
"Company" Preamble
"Company Common Stock" Preamble
"Company HQ" Section 5.06(g)
"Company HQ Landlord" Section 5.06(g)
"Company HQ Lease" Section 5.06(g)
"Company Real Property" Section 3.20(k)(i)
"Company Stock Options" Section 1.04(a)
"Confidentiality Agreement" Section 5.15(a)
"Conveyance Notice" Section 5.06(c)
"Credit Agreement" Section 3.15(g)
"D&T" Section 5.03(b)
"Data" Section 5.19
"Declarant" Section 5.22
"Deposit" Section 1.03
"Desert Resorts Off-Site Employee Parking Lot" Section 5.06(i)
"Emerald Point Lease" Section 3.20(k)(ii)
TERM PLACE OF DEFINITION
"Emerald Point Subsidiary" Section 3.20(k)(iii)
"Entity Shareholder" Section 5.16
"Environmental Laws" Section 3.19(c)(i)
"ERISA" Section 3.14(c)
"Escrow Agent" Section 5.01(b)
"Escrow Agreement" Section 5.01(b)
"Estimated Working Capital Amount" Section 1.02(c)(i)
"Exchange Act" Section 3.04(a)
"Excluded Real Properties" Section 3.20(k)(iv)
"Existing Surveys" Section 3.20(k)(v)
"Final Purchase Price" Section 1.02(a)(v)
"Final Working Capital Amount" Section 1.02(c)(ii)
"Financial Statements" Section 3.10(a)
"Financing" Section 4.09
"GA" Preamble
"GA Holdback Amount" Section 1.02(a)(vi)
"GA Shares" Preamble
"GAAP" Section 1.02(c)(i)
"Governmental Authority" Section 3.04(a)
"Grove #1" Section 3.20(k)(iv)
"GS&Co." Section 3.08(a)
"Indemnified Party" Section 5.02(f)
"Independent Arbitrator" Section 1.02(d)
"Intellectual Property" Section 3.12
"Interim Financial Statements" Section 3.10(a)
"Interim Management Agreement" Section 5.05
"IRS" Section 3.14(b)
"JV Affiliates" Section 5.06(h)
"JV Properties" Section 5.06(h)
"KKR II" Preamble
"KKR II Holdback Amount" Section 1.02(a)(vii)
"KKR II Shares" Preamble
"KSL Desert" Section 5.22
"La Quinta Declaration" Section 5.22
TERM PLACE OF DEFINITION
"Laws" Section 3.04
"Leased Real Property" Section 3.20(k)(vi)
"Liens" Section 3.01(c)
"Losses" Section 5.02(a)
"Management Holdback Amount" Section 1.02(a)(viii)
"Management Percentage Share" Section 5.01(f)
"Management Shares" Preamble
"Management Stockholder" Preamble
"Management Stockholders" Preamble
"Material Adverse Effect" Section 3.04(a)
"Material Contracts" Section 3.13(a)
"Material Real Property Contracts" Section 3.20(d)
"Materials of Environmental Concern" Section 3.19(c)(ii)
"Membership Documents" Section 3.20(k)(viii)
"Model Home Parking Lot" Section 5.06(i)
"Mountain Land Adjacent to Ranch Property" Section 5.06(h)
"MPPA Plan" Section 3.14(f)
"Multiemployer Plan" Section 3.14(h)(iv)
"Non-Competition Agreement" Section 5.18
"North Edge Portion of North Employee Section 3.20(k)(iv)
Parking Lot at ATM's Clubhouse"
"Optionholder" Section 1.04(a)
"Optionholders" Section 1.04(a)
"Optionholders Holdback Amount" Section 1.02(a)(ix)
"Optionholder Percentage Share" Section 5.01(f)
"Owned Real Property" Section 3.20(k)(viii)
"Parcel A of the Blue View at Doral" Section 3.20(k)(iv)
"Parent" Section 6.03(a)
"Percentage Share" Section 1.02(a)(x)
"Permits" Section 3.06
"Permitted Exceptions" Section 3.20(k)(ix)
"Permitted Title Exception" Section 3.20(k)(xi)
"PGA West Tournament Clubhouse Parking Lot" Section 5.06(i)
"Plan" Section 3.14(b)
TERM PLACE OF DEFINITION
"Private Club Tennis and Parking" Section 5.06(h)
"Purchaser" Preamble
"RA" Preamble
"RA Holdback Amount" Section 1.02(a)(x)
"RA Shares" Preamble
"Records" Section 5.09
"Reference Working Capital Amount" Section 1.02(a)(xi)
"Release" Section 3.19(c)(iii)
"Seller" Preamble
"Sellers" Preamble
"Seller Shares" Preamble
"Share Number" Section 1.02(a)(xiii)
"Shares" Preamble
"Xxxxxxx Xxxxxxx" Section 2.01
"Space Leases" Section 3.20(e)(i)
"State Governmental Consents" Section 5.10(b)
"Stock Plans" Section 1.04(a)
"Subsidiaries" Section 3.02(a)
"Subsidiary" Section 3.02(a)
"Subsidiary Shares" Section 3.02(b)
"Supplemental Holdback" Section 1.02(d)
"Taxes" Section 3.16(a)(i)
"Tax Return" Section 3.16(a)(ii)
"Third Party Claim" Section 5.02(f)
"Title Commitment" Section 3.20(k)(xii)
"Title Company" Section 3.20(k)(xiii)
"Transaction Fees Section 5.03(b)
"Transferred Real Properties" Section 3.20(k)(xiv)
"Updated Survey" Section 3.20(k)(xv)
"Working Capital Subaccount" Section 1.02(a)(xii)
