Exhibit 10.1
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STOCK PURCHASE AGREEMENT
dated as of February 10, 1999
by and among
Meditrust Corporation,
a Delaware corporation,
and
Meditrust Operating Company,
a Delaware corporation
and
Golf Acquisitions, L.L.C.,
a Delaware limited liability company
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TABLE OF CONTENTS
ARTICLE I
PURCHASE OF SHARES; CLOSING.............................................................................................1
Section 1.1 Purchased Shares....................................................................................1
Section 1.2 Deposit; Liquidated Damages.........................................................................2
Section 1.3 Purchase Price......................................................................................4
Section 1.4 Closing.............................................................................................6
Section 1.5 Transactions at Closing.............................................................................6
Section 1.6 Allocation of Purchase Price; Other Matters.........................................................7
Section 1.7 Time of the Essence.................................................................................8
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS...........................................................................8
Section 2.1 Organization of the Sellers and the Acquired Companies; Authority...................................8
Section 2.2 Capitalization; Subsidiaries........................................................................9
Section 2.3 No Conflict........................................................................................10
Section 2.4 Financial Statements; Undisclosed Liabilities; Financial Condition.................................11
Section 2.5 Absence of Certain Changes.........................................................................12
Section 2.6 Consents and Approvals.............................................................................14
Section 2.7 Litigation.........................................................................................15
Section 2.8 Taxes..............................................................................................15
Section 2.9 Employee Benefit Plans.............................................................................16
Section 2.10 Assets; Properties.................................................................................18
Section 2.11 Labor and Employment Matters.......................................................................20
Section 2.12 Contracts and Commitments..........................................................................20
Section 2.13 Intellectual Property..............................................................................21
Section 2.14 Environmental Matters..............................................................................22
Section 2.15 Compliance with Laws; Permits......................................................................23
Section 2.16 Insurance..........................................................................................23
Section 2.17 Brokers............................................................................................24
Section 2.18 Disclaimer; Knowledge; Disclosure; Material Adverse Effect.........................................24
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER............................................................................26
Section 3.1 Organization of the Buyer; Authority...............................................................26
Section 3.2 No Conflict........................................................................................27
Section 3.3 Consents and Approvals.............................................................................27
Section 3.4 Litigation.........................................................................................28
Section 3.5 Financing..........................................................................................28
Section 3.6 Brokers............................................................................................28
Section 3.7 Investment Intent..................................................................................28
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(i)
Section 3.8 Buyer's Knowledge..................................................................................28
ARTICLE IV
CERTAIN COVENANTS AND AGREEMENTS OF THE BUYER AND SELLER
......................................................................................................................29
Section 4.1 Conduct of Business Prior to Closing...............................................................29
Section 4.2 Investigation......................................................................................33
Section 4.3 Access to Information..............................................................................33
Section 4.4 Confidentiality....................................................................................35
Section 4.5 Regulatory and Other Authorizations; Consents......................................................36
Section 4.6 Further Action.....................................................................................37
Section 4.7 Press Releases.....................................................................................37
Section 4.8 No Solicitation....................................................................................37
Section 4.9 Tax Cooperation; Structuring Matters...............................................................38
Section 4.11 Liquor Licenses....................................................................................39
Section 4.12 Environmental Assessments..........................................................................40
Section 4.13 Property Holdback Rights...........................................................................41
Section 4.14 Observation Rights; Certain Communications.........................................................43
ARTICLE V
EMPLOYEE MATTERS.......................................................................................................44
Section 5.1 Employees..........................................................................................44
Section 5.2 Employee Benefits..................................................................................44
Section 5.3 Other Employee Benefits............................................................................45
Section 5.4 Indemnity..........................................................................................45
Section 5.5 No Third Party Beneficiaries.......................................................................45
ARTICLE VI
TAX MATTERS............................................................................................................45
Section 6.1 Conveyance Taxes; Costs............................................................................45
Section 6.2 Treatment of Indemnity Payments....................................................................46
Section 6.3 Employee Withholding...............................................................................46
ARTICLE VII
CONDITIONS TO CLOSING..................................................................................................46
Section 7.1 Conditions to the Obligations of Each Party........................................................46
Section 7.2 Conditions to Obligations of the Sellers...........................................................47
Section 7.3 Conditions to Obligations of the Buyer.............................................................47
ARTICLE VIII
INDEMNIFICATION........................................................................................................48
Section 8.1 Survival...........................................................................................48
Section 8.2 Indemnification by the Sellers.....................................................................49
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(ii)
Section 8.3 Indemnification by the Buyer.......................................................................51
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER......................................................................................53
Section 9.1 Termination........................................................................................53
Section 9.2 Effect of Termination..............................................................................55
Section 9.3 Waiver.............................................................................................56
ARTICLE X
GENERAL PROVISIONS.....................................................................................................56
Section 10.1 Notices............................................................................................56
Section 10.2 Certain Definitions................................................................................59
Section 10.3 Interpretation.....................................................................................59
Section 10.4 Counterparts.......................................................................................60
Section 10.5 Entire Agreement; No Third-Party Beneficiaries; Severability.......................................60
Section 10.6 Amendment..........................................................................................60
Section 10.7 Governing Law......................................................................................60
Section 10.8 Assignment.........................................................................................60
Section 10.9 Expenses...........................................................................................61
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(iii)
EXHIBITS LIST
Exhibit A Companies and Acquired Shares
Exhibit B Subsidiaries Owned by the Companies
Exhibit C Form of Escrow Agreement
Exhibit D Form of Transferor's Certificate of Non-Foreign Status
SCHEDULES LIST
Schedule 1.6(a) Purchase Price Allocation
Schedule 1.6(b) Fair Market Value of MGG and MGG II Assets
Schedule 2.2(a) Company Capitalization
Schedule 2.2(b) Company Subsidiaries
Schedule 2.3 Conflicts of Sellers
Schedule 2.4 October Financial Statements
Schedule 2.5 Absence of Certain Changes
Schedule 2.6(a) Governmental Consents
Schedule 2.6(b) Third-Party Consents
Schedule 2.7 Litigation
Schedule 2.8 Taxes
Schedule 2.9 Employee Benefit Matters
Schedule 2.10(a) Owned Properties
Schedule 2.10(b) Leased Properties
Schedule 2.10(c) Property Restrictions
Schedule 2.10(d) Property Taxes
Schedule 2.11(a) Employment Matters
Schedule 2.11(b) Labor Matters
Schedule 2.12(a) Certain Contracts
Schedule 2.12(b) Certain Contract Exceptions
Schedule 2.13 Intellectual Property
Schedule 2.14 Environmental Matters
Schedule 2.15 Compliance with Laws; Permits
Schedule 2.16 Insurance
Schedule 2.18(b) Qualifying Materials
Schedule 3.2 Conflicts of Buyer
Schedule 3.3(a) Government Consents
Schedule 3.3(b) Third-Party Consents
Schedule 4.1(a)(i) Conduct of Business
Schedule 4.1(c) Exceptions to Restrictions on Conduct of Business
Schedule 4.7 Form of Press Release
Schedule 4.12 Environmental Assessments
Schedule 4.13 Property Holdback Rights
Schedule 6.4 Allocation for Cobblestone Assets
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(iv)
Schedule 7.3(b) Required Consents
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(v)
DEFINED TERMS
Agreement ...................................................................1
REITCO ...................................................................1
OPCO ...................................................................1
Sellers ...................................................................1
Buyer ...................................................................1
MGG ...................................................................1
Cobblestone...................................................................1
MGG II ...................................................................1
Companies ...................................................................1
Subsidiaries..................................................................1
Acquired Companies............................................................1
Acquired Shares...............................................................1
Transfer ...................................................................1
Escrow Agent..................................................................2
Deposit ...................................................................2
Escrow Fund...................................................................2
Escrow Agreement..............................................................2
Liquidated Damages............................................................2
Code ...................................................................3
Qualifying Income.............................................................3
IRS ...................................................................3
Purchase Price................................................................4
Closing Balance Sheet.........................................................4
GAAP ...................................................................4
Closing Adjustment............................................................4
Review Period.................................................................5
Disputed Items................................................................5
Arbitrating Accountant........................................................5
Closing ...................................................................6
Closing Date..................................................................6
Allocation Schedule...........................................................8
October Balance Sheet........................................................11
October Financial Statements.................................................11
Severance Arrangements.......................................................13
Retention Bonuses............................................................13
Governmental Authority.......................................................14
HSR Act ..................................................................14
IRS ..................................................................15
Taxes ..................................................................16
Tax Return ..................................................................16
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(vi)
Benefit Plans................................................................16
ERISA ..................................................................17
ERISA Affiliate..............................................................17
Owned Properties.............................................................18
Land ..................................................................18
Improvements.................................................................18
Leasehold ..................................................................18
Lease ..................................................................18
Leased Properties............................................................18
Leased Improvements..........................................................18
Properties ..................................................................18
Property Restrictions........................................................19
Existing Debt................................................................20
Intellectual Property Rights.................................................21
Environmental Reports........................................................22
Environmental Laws...........................................................22
Environmental Condition......................................................22
Environmental Liabilities and Costs..........................................23
Law ..................................................................23
Governmental Order...........................................................23
Confidential Memorandum......................................................24
Review Room..................................................................25
Qualifying Materials.........................................................25
Sellers' Knowledge...........................................................25
Material Adverse Effect......................................................26
Buyer's Knowledge............................................................28
Club ..................................................................32
Representatives..............................................................35
Confidentiality Agreement....................................................35
Notification Form............................................................36
Acquisition Proposal.........................................................37
Proposal ..................................................................38
Superior Proposal............................................................38
Phase II Investigations......................................................41
Holdback Designation Date....................................................41
Holdback Property............................................................41
Holdback Letter..............................................................41
Allocated Value..............................................................42
Holdback Property Closing Date...............................................42
Sellers' Designees...........................................................43
Acquired Companies Employees.................................................44
WARN ..................................................................44
Required Consents............................................................47
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(vii)
Buyer Indemnified Party......................................................49
Organization Reps............................................................49
Tax Reps ..................................................................49
Benefit Plan Reps............................................................49
Broker's Fee Reps............................................................49
Indemnified Disputes.........................................................49
Excluded Claims..............................................................49
Indemnification Cut-Off Date.................................................49
Threshold Amount.............................................................49
Maximum Amount...............................................................50
Seller Indemnified Party.....................................................51
Significant Environmental Liabilities........................................54
Baseline Condition...........................................................55
Affiliate ..................................................................59
Business Day.................................................................59
Encumbrance..................................................................59
Losses ..................................................................59
Person ..................................................................59
Subsidiary ..................................................................59
Significant Subsidiary.......................................................59
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(viii)
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of this
10th day of February, 1999, by and among MEDITRUST CORPORATION, a Delaware
corporation ("REITCO"), MEDITRUST OPERATING COMPANY, a Delaware corporation
("OPCO" and, together with REITCO, the "Sellers" and, each individually, a
"Seller") and GOLF ACQUISITIONS, L.L.C., a Delaware limited liability company
(the "Buyer").
WHEREAS, as set forth on Exhibit A hereto, REITCO owns all of the
issued and outstanding capital stock of Meditrust Golf Group, Inc., a Delaware
corporation ("MGG");
WHEREAS, as set forth on Exhibit A hereto, OPCO owns all of the
issued and outstanding capital stock of The Cobblestone Golf Companies, Inc., a
Delaware corporation ("Cobblestone");
WHEREAS, as set forth on Exhibit A hereto, REITCO owns, or will own
as of the Closing Date (as hereinafter defined), all of the issued and
outstanding capital stock of Meditrust Golf Group II, Inc., a Delaware
corporation ("MGG II" and, together with MGG and Cobblestone, the "Companies";
and each individually, a "Company");
WHEREAS, the Companies directly or indirectly own all (except as
disclosed on Schedule 2.2(b) hereto) of the issued and outstanding capital stock
of those entities set forth on Exhibit B hereto (collectively, the
"Subsidiaries" and, each individually, a "Subsidiary" and, together with the
Companies, the "Acquired Companies" and, each individually, an "Acquired
Company");
WHEREAS, the Acquired Companies are engaged in the ownership,
leasing, and operation of golf course properties; and
WHEREAS, the Sellers desire to sell and the Buyer desires to purchase
all of the issued and outstanding capital stock (the "Acquired Shares") of the
Companies.
NOW THEREFORE, in consideration of the mutual agreements and
covenants herein contained, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties, intending to
be legally bound, hereby agree as follows:
ARTICLE I
PURCHASE OF SHARES; CLOSING
Section 1.1 Purchased Shares. Subject to the terms and conditions set
forth in this Agreement, at the Closing (as hereinafter defined), each Seller
shall sell, assign, transfer, convey and deliver (the "Transfer") to the Buyer,
from each such Seller, and the Buyer shall
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buy and receive from each such Seller all, and not less than all, of such
Seller's right, title and interest as of the Closing Date, in and to the
Acquired Shares as set forth on Exhibit A hereto.
Section 1.2 Deposit; Liquidated Damages.
(a) No later than the first Business Day (as hereinafter defined)
after the date this Agreement is executed and delivered by all parties hereto,
the Buyer shall deliver to Xxxxxxx Title Guaranty Company, as escrow agent (the
"Escrow Agent"), the sum of Fifteen Million-Four Hundred-Forty Thousand U.S.
Dollars (US$15,440,000) (the "Deposit"). The Deposit shall be held in escrow by
the Escrow Agent in an interest-bearing account (the "Escrow Fund") subject to
the Escrow Agreement substantially in the form of Exhibit C attached hereto (the
"Escrow Agreement"), and, subject to the terms and conditions set forth below
with respect to the termination of this Agreement, shall be delivered, together
with interest earned thereon, to the Sellers at Closing (as hereinafter defined)
as a credit against the Purchase Price (as hereinafter defined):
(i) In the event of the termination of this Agreement
pursuant to Section 9.1(a), 9.1(d), 9.1(e) or 9.1(f), following expiration of
the five (5) business day time period provided for in Section 3(b) of the Escrow
Agreement, Buyer shall receive (in addition to those rights (if any) that it may
have under Section 9.2(b) hereof in connection with a termination pursuant to
Section 9.1(f) only), as its sole and exclusive remedy (subject to this Section
1.2(a)(i) with respect to any impediment by the Sellers to delivery of the
Escrow Fund to the Buyer), the Deposit, together with all interest (if any)
actually earned thereon, and each party shall be relieved and released from any
further liability and obligation hereunder subject to any continuing obligations
pursuant to Section 4.4. In the event Buyer is entitled to receive the return of
the Deposit pursuant to this Section 1.2(a)(i), if the Sellers directly or
indirectly impede the prompt payment by the Escrow Agent from the Escrow Fund as
described in Section 1.2(a) above, the Sellers shall be obligated to pay all
costs and expenses (including legal fees and expenses) in connection with any
action, including the filing of any lawsuit or other legal action, taken to
collect such payment, together with interest on the amount of any unpaid amount
from the date such amount was required to be paid at an interest rate equal to
the prime rate published by The Wall Street Journal from time to time; and
(ii) In the event of the termination of this Agreement
pursuant to Section 9.1(b) or Section 9.1(c), following expiration of the five
(5) business day time period set forth in Section 3(a) of the Escrow Agreement,
the Buyer's sole right to receive payment from the Escrow Fund shall be as set
forth in Section 1.2(c) hereof and the Sellers shall be entitled to payments
from the Escrow Fund when, as and if permitted by Section 1.2(b) hereof. Such
entitlement to receive payments from the Escrow Fund shall represent Sellers'
sole and exclusive remedy in connection with such termination (subject to this
Section 1.2(a)(ii) with respect to any Buyer impediment to payments from the
Escrow Fund) and shall constitute liquidated damages (the "Liquidated Damages"),
and each party shall be relieved and released from any further liability and
obligation hereunder subject to any continuing obligations
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pursuant to Section 4.4. Sellers and the Buyer agree that actual damages
accruing from such a termination of this Agreement are incapable of precise
estimation and would be difficult to prove, that the rights stipulated in this
Section 1.2 bear a reasonable relationship to the potential injury likely to be
sustained in the event of such a breach and that the stipulated rights are
intended by the parties to provide just compensation in the event of such a
breach and are not intended to compel performance or to constitute a penalty for
nonperformance. In the event Sellers are entitled to receive the Deposit (or the
Escrow Fund, as applicable) pursuant to this Agreement or the Escrow Agreement,
as applicable, if the Buyer directly or indirectly impedes the prompt payment by
the Escrow Agent from the Escrow Fund as described in Section 1.2(b) below, the
Buyer shall be obligated to pay all costs and expenses (including legal fees and
expenses) in connection with any action, including the filing of any lawsuit or
other legal action, taken to collect such payment, together with interest on the
amount of any unpaid amount from the date such amount was required to be paid at
an interest rate equal to the prime rate published by The Wall Street Journal
from time to time. The parties hereby acknowledge that the agreements contained
in this Section 1.2 are an integral part of the transactions contemplated by
this Agreement.
(b) In the event of a termination described in Section 1.2(a)(ii)
hereof, following the expiration of the five (5) business day time period set
forth in Section 3(a) of the Escrow Agreement (if applicable), the Buyer and the
Sellers agree that the Escrow Agent may not make payments from the Escrow Fund
to Buyer or the Sellers except as provided in Section 1.2(c), with respect to
the Buyer, and this Section 1.2(b), with respect to the Sellers. The Escrow Fund
or any portion thereof shall not be released to the Sellers unless the Escrow
Agent receives any one or combination of the following: (x) a letter from
REITCO's certified public accountants indicating the maximum amount that can be
paid by the Escrow Agent to the Sellers without causing REITCO to fail to meet
the requirements of Sections 856(c)(2) and (3) of the Internal Revenue Code of
1986, as amended (the "Code") determined as if the payment of such amount did
not constitute income described in Sections 856(c)(2)(A)-(H) or 856(c)(3)(A)-(I)
of the Code ("Qualifying Income"), as determined by REITCO's certified public
accountant, or a subsequent letter from REITCO's accountants revising such
amount, in which case the Escrow Agent will release to the Sellers the amount(s)
so specified in said accountants' letters, or (y) a letter from REITCO's counsel
indicating that REITCO received a ruling from the Internal Revenue Service (the
"IRS") holding that the receipt by REITCO of the amounts from the Escrow Fund
would either constitute Qualifying Income or would be excluded from gross income
within the meaning of Section 856(c)(2) and (3) of the Code (or alternatively,
REITCO's legal counsel has rendered a legal opinion to REITCO to the effect that
the receipt by the Sellers of the amounts from the Escrow Fund would either
constitute Qualifying Income or would be excluded from gross income within the
meaning of Sections 856(c)(2) and (3) of the Code), in which case the Escrow
Agent will release to the Sellers the amount of the Escrow Fund so specified in
said accountants' letters. The Buyer agrees to amend this Section 1.2 at the
request of REITCO as may reasonably be necessary (and without additional cost,
burden or liability to the Buyer, in excess of de minimis amounts) in order to
(i) maximize the portion of the Escrow Fund that may be distributed to the
Sellers hereunder
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without causing REITCO to fail to meet the requirements of Sections 856(c)(2)
and (3) of the Code, (ii) improve REITCO's chances of securing a favorable
ruling described in this Section 1.2(b), or (iii) assist REITCO in obtaining a
favorable legal opinion from its counsel as described in this Section 1.2(b);
provided that REITCO's legal counsel has rendered a legal opinion to REITCO to
the effect that such amendment would not cause REITCO to fail to meet the
requirements of Section 856(c)(2) or (3) of the Code.
(c) Any portion of the foregoing Escrow Fund remaining on the
fifteenth anniversary of the date of its establishment will be released by the
Escrow Agent to the Buyer.
Section 1.3 Purchase Price; Closing Adjustment.
(a) Subject to the terms and conditions set forth in this
Agreement, at the Closing, the Buyer shall pay, or cause to be paid, to REITCO
and OPCO, in accordance with the terms of this Agreement, the aggregate amount
of Three Hundred Ninety-One Million Two Hundred Seventy-Eight Thousand U.S.
Dollars (US$391,278,000), subject to Section 4.13, minus the sum as reflected on
the Closing Balance Sheet of (i) long-term debt, less current portion, (ii)
capital lease obligations, less current portion, and (iii) deferred purchase
price liabilities, less current portion (the resulting amount shall be referred
to as the "Purchase Price"). At the Closing, the Buyer shall pay, or cause to be
paid, the Purchase Price (A) by the Escrow Agent delivering to the Sellers the
Deposit, together with interest earned thereon, and (B) by wire transfer of
immediately available funds to a bank account or accounts jointly designated by
the Sellers in an amount equal to the Purchase Price, less the Deposit and
interest earned thereon delivered by the Escrow Agent to the Sellers.
(b) Within forty-five (45) days after the Closing Date, Sellers
shall prepare and PricewaterhouseCoopers LLP shall deliver to the Buyer an
audited combined consolidated balance sheet of the Acquired Companies as of the
Closing Date (the "Closing Balance Sheet"), prepared in accordance with
generally accepted accounting principles in the United States, as in effect from
time to time, applied on a consistent basis ("GAAP"), which sets forth the book
values of the assets and the liabilities of the Acquired Companies as of the
Closing Date, and a calculation of the Closing Adjustment to the Purchase Price.
The "Closing Adjustment" shall be a positive or negative number equal to (A)(i)
the sum of the book values determined in accordance with GAAP of: (a) cash and
cash equivalents less $5,278,000 (which may be a negative number), plus (b)
accounts receivable (excluding receivables over 90 days old), inventory, prepaid
expenses and other current assets, current portion of notes receivable (net),
and notes receivable (net) (representing the long-term portion of notes
receivable related to membership sales) as included in the Closing Balance
Sheet, minus (ii) the sum of the balances determined in accordance with GAAP of:
accounts payable, accrued payroll and related expenses, other current
liabilities, deferred revenue (excluding deferred revenue related to membership
initiation fees), income taxes payable, accrued property taxes, accrued sales
tax, current portion of deferred purchase price, current portion of long term
debt, current portion of capital lease obligations, minority interest, accrued
rent and any inter-company debt,
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as included in the Closing Balance Sheet; provided, however, that in no event
shall amounts (if any) which may be or may become due and payable under the
Retention Bonuses (as defined in Section 2.5(d) hereof) or the Severance
Arrangements (as defined in Section 2.5(d) hereof) be included, through accrual
or otherwise, in the calculation of the Closing Adjustment. Notwithstanding the
actual date of the Closing, in the event the Closing occurs after March 31,
1999, the Closing Adjustment shall be calculated as of March 31, 1999.
(c) The Buyer and their independent public accountants, KPMG Peat
Marwick, LLP, shall be entitled to make an independent review of the Closing
Balance Sheet and related calculation of the Closing Adjustment and shall,
during the fifteen (15) day period after delivery of the Closing Balance Sheet
and related calculation of the Closing Adjustment (the "Review Period"), have
access to all relevant work papers of PricewaterhouseCoopers LLP used to audit
the Closing Balance Sheet and the Closing Adjustment.
(d) Before expiration of the Review Period, the Buyer shall
deliver to the Sellers its objection, if any, in writing to the calculation of
the Closing Adjustment, together with details of the disputed items (the
"Disputed Items") set forth in the Closing Balance Sheet and the proposed
adjustments to such items. If the Buyer fails to provide notice of objection
prior to the end of the Review Period, then the Closing Balance Sheet and the
calculation of the Closing Adjustment by PricewaterhouseCoopers LLP shall be
final and binding on all the parties. If the Buyer so notifies the Sellers prior
to the end of the Review Period of the Buyer's disapproval of the calculation of
the Closing Adjustment or the Closing Balance Sheet audited by
PricewaterhouseCoopers LLP, then the Buyer and the Sellers shall attempt to
reach agreement with respect to the Disputed Items. In the event that the Buyer
and the Sellers are unable to reach agreement on the Disputed Items, then either
shall be entitled to refer the matter to a nationally recognized accounting
firm, independent of the Sellers and the Buyer, mutually agreed upon by the
Buyer and the Sellers, provided, that if the Buyer and the Sellers are unable to
agree upon such accounting firm within a period of fifteen (15) days from the
receipt by the Sellers of the Buyer's objection, such accounting firm shall be
chosen at random by the Buyer and the Sellers from among the "Big Five"
accounting firms which are independent of the Buyer and the Sellers (the
"Arbitrating Accountant"). The Arbitrating Accountant shall determine the
Disputed Items and calculate the Closing Adjustment within twenty (20) days
after the Disputed Items are submitted to them, and such determination shall be
final and binding upon all the parties. The fees and expenses of the Arbitrating
Accountants shall be paid 50% by the Buyer and 50% by the Sellers.
(e) The amount of the Closing Adjustment as finally determined
shall be paid in cash, within five (5) business days after final determination
of the Closing Adjustment. If the Closing Adjustment is a positive number, then
the Buyer shall promptly pay to the Sellers by wire transfer of immediately
available funds to a bank account or accounts jointly designated by the Sellers
the dollar amount of the Closing Adjustment. If the Closing Adjustment is a
negative number, then the Sellers shall promptly pay to the Buyer by wire
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transfer of immediately available funds to a bank account or accounts designated
by the Buyer the amount of such deficit.
Section 1.4 Closing. The closing of the Transfer and delivery of all
documents and instruments necessary to consummate the transactions contemplated
by this Agreement (the "Closing") shall be held at the offices of Xxxxxxx,
Procter & Xxxx LLP, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, xx March 31, 1999
(with a complete pre-closing on or about March 24, 1999 or, if the Closing
occurs after March 31, 1999, such pre-closing shall occur approximately one (1)
week prior to such extended Closing Date) or at such other time or such other
place as the Buyer and the Sellers may agree, but in no event later than March
31, 1999 except as expressly permitted pursuant to this Agreement. The Sellers
shall have the right to postpone the Closing for an additional period of time
not exceeding (i) forty-five (45) days by giving written notice to the Buyer if
the Sellers' failure to close is not as a result of a breach of Sellers'
covenants or other agreements contained in this Agreement or (ii) ninety (90)
days by giving written notice to the Buyer in order to permit the satisfaction
of the conditions precedent to the obligations of the Buyer set forth in Section
7.1 or Section 7.3 hereof. The date on which the Closing is actually held
hereunder is sometimes referred to herein as the "Closing Date." The Closing
will be deemed to be effective for purposes of this Agreement as of the opening
of business on the Closing Date. The Sellers agree (i) to provide notice of an
extension of the Closing Date beyond March 31, 1999 on or before March 16, 1999,
and (ii) in the event the Closing Date is extended, to provide notice of the
proposed Closing Date at least fifteen (15) days prior to such proposed Closing
Date.
Section 1.5 Transactions at Closing.
(a) At the Closing, the Sellers will deliver or cause to be
delivered to the Buyer the following:
(i) stock certificates, evidencing all, and not less than
all, of the Acquired Shares, in each case duly endorsed in blank or accompanied
by stock powers duly executed in blank, and with all required stock transfer tax
stamps affixed, or if such stock certificates are not then available, affidavits
of loss and indemnity agreements in lieu thereof in form and substance
reasonably acceptable to the Buyer;
(ii) all minute books and stock transfer books of each of the
Acquired Companies;
(iii) one or more receipts acknowledging receipt of the
aggregate Purchase Price;
(iv) a legal opinion addressed to the Buyer, in form
reasonably acceptable to the Buyer, that each of the Sellers is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all the requisite
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corporate power and authority to enter into this Agreement, to carry out its
obligations hereunder and to consummate the transactions contemplated hereby;
(v) REITCO shall contribute the Note dated as of August 7,
1998 in the principal amount of $6,215,720, together with an assignment, in
recordable form, the related Leasehold Deed of Trust dated as of August 7, 1998
to either MGG or MGG II (or their designee); and
(vi) each of the certificates and other documents required to
be delivered at the Closing pursuant to Section 7.3 hereof.
(b) At the Closing, the Buyer will deliver or cause to be
delivered to the Sellers the following:
(i) the Purchase Price, by wire transfer in cash of
immediately available funds pursuant to, and in the manner set forth in, Section
1.3 hereof; and
(ii) each of the certificates and other documents required to
be delivered at the Closing pursuant to Section 7.2 hereof.
Section 1.6 Allocation of Purchase Price; Other Matters.
(a) The purchase price shall be allocated among the Acquired
Shares of each of MGG, Cobblestone and MGG II by first allocating an amount of
the purchase price to the Acquired Shares of Cobblestone in an amount equal to
the net adjusted tax basis of the assets of Cobblestone (which the parties
believe represents the net fair market value of such assets), and then
allocating the balance of the purchase price among the Acquired Shares of MGG
and MGG II based upon the relative fair market value of the Acquired Shares of
MGG and MGG II. Such allocation shall be determined by Sellers within 60 days
after the Closing and included in a schedule (the "Allocation Schedule")
furnished to the Buyer.
(b) Based upon the understanding of the parties that MGG, MGG II
and each of their wholly-owned Subsidiaries is a "Qualified REIT Subsidiary"
under Section 856(i) of the Code immediately prior to the Closing, Buyer and
REITCO agree that, immediately prior to the Closing of Buyer's purchase of MGG's
and MGG II's capital stock, each of MGG and MGG II (and each of their
wholly-owned Subsidiaries) shall be deemed, for federal income tax purposes, to
have been incorporated in a taxable transaction resulting in (i) the recognition
of gain or loss to REITCO on such deemed incorporation under section 1001 of the
Code and (ii) the tax basis of the assets of MGG and MGG II (and each of their
wholly-owned Subsidiaries) being determined under section 1012 of the Code. The
Allocation Schedule prepared by the Sellers shall include an allocation of the
deemed purchase price (i.e., the fair market value of the stock deemed issued by
MGG and MGG II (and each of their wholly-owned Subsidiaries)) among the assets
deemed acquired by MGG and MGG II (and each of their wholly-owned
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Subsidiaries) in the deemed incorporation transactions within 60 days after the
Closing (the "Allocation Schedule"), based upon the rules in Section 1060 of the
Code. Notwithstanding the foregoing, if MGG, MGG II or Cobblestone (or any of
their Subsidiaries) is converted into a limited liability company which is
treated as a "disregarded" entity for federal income tax purposes, with the
result that a Seller is deemed to have directly sold to the Buyer one or more
assets that such Seller is deemed to directly own for federal income tax
purposes, the Allocation Schedule prepared by the Sellers shall include an
allocation of the purchase price paid by the Buyer to such directly owned
assets, based upon the rules in section 1060 of the Code.
(c) The Allocation Schedule shall be binding upon Buyer and
Sellers for all purposes (including financial accounting, financial, regulatory
reporting and tax purposes except to the extent that the Sellers' and Buyers'
independent public accountants mutually agree that such allocation would be
inappropriate for financial accounting, financial and/or regulatory reporting
purposes). The Sellers shall file, and the Buyer shall cause MGG and MGG II to
file, all relevant tax returns (including Form 8594) in accordance with such
Allocation Schedule as prepared by Sellers.
Section 1.7 Time of the Essence. The parties hereto acknowledge and
agree that, subject only to the express adjournment rights contained herein,
time is of the essence in consummating the purchase and sale of the Acquired
Shares and the delivery of the Purchase Price.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Except as disclosed in the schedules attached hereto, the Sellers
jointly and severally represent and warrant to the Buyer as follows:
Section 2.1 Organization of the Sellers and the Acquired Companies;
Authority.
(a) Each of the Sellers is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware
and has all the requisite corporate power and authority to enter into this
Agreement, to carry out its obligations hereunder and to consummate the
transactions contemplated hereby. Each Acquired Company is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of organization and has all the requisite corporate power and
authority to carry on its business as now being conducted and to own, operate
and lease the properties and assets owned, operated and leased by it. Each of
the Acquired Companies is qualified to do business and is in good standing in
each jurisdiction in which the nature of its business requires it to be so
qualified, except to the extent the failure to so qualify would not, either
individually or in the aggregate, have a Material Adverse Effect (as hereinafter
defined).
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(b) The execution and delivery of this Agreement, the performance
by the Sellers of their obligations hereunder and the consummation of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of the Sellers. This Agreement has been duly
executed and delivered by the Sellers and assuming the due authorization,
execution and delivery of this Agreement by the Buyer, this Agreement
constitutes a legal, valid and binding obligation of the Sellers, enforceable
against the Sellers in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally or by general equitable principles.
Section 2.2 Capitalization; Subsidiaries.
(a) The authorized, issued and outstanding capital stock of each
of the Companies is set forth on Schedule 2.2(a). All of the issued and
outstanding shares of capital stock of each of the Companies are duly
authorized, validly issued, fully paid and nonassessable. None of the issued and
outstanding shares of capital stock of the Companies were issued in violation of
any preemptive rights. Except as set forth on Schedule 2.2(a) hereto, there are
no outstanding options, warrants or other rights of any kind to acquire any
additional shares of capital stock of any of the Companies or securities
convertible into or exchangeable for, or which otherwise confer on the holder
thereof any right to acquire, any such additional shares, nor are any of the
Companies committed to issue any such option, warrant, right or security. Except
as set forth on Schedule 2.2(a) hereto, there are no outstanding oral or written
contractual obligations of the Companies to repurchase, redeem or otherwise
acquire any of the Acquired Shares, or to provide funds to, or to make any
investment (in the form of a loan, capital contribution or otherwise) in, any
other Person (as hereinafter defined) in each case except in connection with the
making of loans and the entering into of leases in the ordinary course of
business consistent with past practice. Except as set forth on Schedule 2.2(a),
(i) the Sellers own, or will own as of the Closing Date, the Acquired Shares,
free and clear of any and all liens, claims, security interests or options,
except for (A) Encumbrances (as hereinafter defined) arising out of, under or in
connection with this Agreement, and (B) Encumbrances that will be released at or
prior to the Closing, and the Sellers have full legal right, power and authority
to sell, transfer and convey the Acquired Shares to the Buyer in the manner
contemplated by this Agreement, except for restrictions on transfer under
applicable federal and state securities laws, and (ii) except as set forth on
Schedule 2.2(b), the Companies do not have, directly or indirectly, any equity
interest in any other corporation, joint venture, partnership, limited liability
company or other entity. Upon consummation of the transactions contemplated by
this Agreement and registration of the Acquired Shares in the name of the Buyer
in the stock records of each respective Company, the Buyer will own all of the
issued and outstanding capital stock of the Companies free and clear of all
Encumbrances, other than any Encumbrances resulting from any facts or
circumstances relating solely to the Buyer (including, without limitation, its
sources of financing).
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(b) Schedule 2.2(b) sets forth a true and complete list of all
Subsidiaries (as hereinafter defined) and their name, jurisdiction and date of
incorporation or formation, their authorized capital stock, partnership capital
or equivalent, the number and type of their issued and outstanding shares of
capital stock, partnership interests or similar ownership interests and the
current ownership of such shares, partnership interests or similar ownership
interests. None of the issued and outstanding shares of capital stock of the
Subsidiaries were issued in violation of any preemptive rights. All of the
issued and outstanding shares of capital stock of each of the Subsidiaries are
duly authorized, validly issued, fully paid and nonassessable. Except as set
forth on Schedule 2.2(b) hereto, there are no outstanding options, warrants or
other rights of any kind to acquire any additional shares of capital stock of
any of the Subsidiaries or securities convertible into or exchangeable for, or
which otherwise confer on the holder thereof any right to acquire, any such
additional shares, nor are any of the Subsidiaries committed to issue any such
option, warrant, right or security. Except as set forth on Schedule 2.2(b)
hereto, there are no outstanding oral or written contractual obligations of the
Subsidiaries to repurchase, redeem or otherwise acquire any shares of common
stock or other ownership interest in the Subsidiaries, or to provide funds to,
or to make any investment (in the form of a loan, capital contribution or
otherwise) in, any other Person in each case except in connection with the
making of loans and the entering into of leases in the ordinary course of
business consistent with past practice. Except as set forth on Schedule 2.2(b),
the Acquired Companies own all of the outstanding capital stock of their
respective Subsidiaries free and clear of any and all liens, claims, security
interests or options, except for (i) Encumbrances arising out of, under or in
connection with this Agreement, and (ii) Encumbrances that will be released at
or prior to the Closing.
(c) Since May 29, 1998, all material corporate actions taken by
each Subsidiary have been duly authorized and the Subsidiary has not taken any
action that in any material respect conflicts with, constitutes a default under
or results in a violation of any provision of its charter or by-laws (or similar
organizational documents). True and complete copies of the charter and by-laws
(or similar organizational documents), in each case as in effect on the date
hereof, of each Subsidiary have been made available by the Sellers to the Buyer.
Section 2.3 No Conflict. Except as provided in Schedule 2.3, and
except as may result from any facts or circumstances relating solely to the
Buyer (including, without limitation, its sources of financing), and assuming
that all consents, approvals, authorizations and other actions set forth in
Section 2.6 have been obtained and all filings and notifications set forth on
Schedule 2.6(a) have been made, neither the Sellers nor the Acquired Companies
are subject to or bound:
(a) (i) by any provision of any law, statute, rule, regulation
or judicial or administrative decision (with respect to the
Sellers and the Acquired Companies, but not with respect to
their respective assets or properties), and (ii) to Sellers'
knowledge (as hereinafter defined) by any provision
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of any law, statue, rule, regulation or judicial or
administrative decision (with respect to the assets and
properties of the Sellers and the Acquired Companies),
(b) by any provisions of the articles or certificate of
incorporation or by-laws (or similar organizational,
constitutive or governing document) of the Sellers' or any
Acquired Company,
(c) to Sellers' Knowledge (as hereinafter defined), by any
provision of any mortgage, deed of trust, lease, note, bond,
indenture, license, permit, trust, contract, agreement,
sublease, franchise or other instrument or arrangement
described on Schedule 2.12(a) to which the Sellers or the
Acquired Companies are a party as it relates to the business
of the Acquired Companies or by which any of the Acquired
Shares or any shares of the Subsidiaries or any of such
assets or properties is bound or affected,
(d) by any provision of any mortgage, deed of trust, lease,
note, bond, indenture, license, permit, trust, contract,
agreement, sublease, franchise or other instrument or
arrangement which is not required to be disclosed on
Schedule 2.12(a) to which the Sellers or the Acquired
Companies are a party as it relates to the business of the
Acquired Companies or by which any of the Acquired Shares or
any shares of the Subsidiaries or any of such assets or
properties is bound or affected,
(e) by any provisions of any shareholders' agreement or
partnership agreement, or
(f) by any provision of any judgment, order, writ, injunction or
decree of any court, governmental body, administrative
agency or arbitrator,
that would prevent, violate or conflict with or under which there would be a
default as a result of the execution, delivery or performance of this Agreement,
nor, is the consent of any person or entity under any material contract or
agreement, which material contract or agreement is not identified in any
Schedule attached to this Agreement, or under federal or state law, which has
not been obtained prior to the Closing, required for the execution, delivery,
and performance by the Sellers of this Agreement and the transactions
contemplated thereby, except for violations, defaults, conflicts or failures to
obtain consents or to make filings or provide notices which would not have (i) a
Material Adverse Effect or (ii) a material adverse effect on the ability of the
Sellers to perform their obligations under this Agreement.
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Section 2.4 Financial Statements; Undisclosed Liabilities; Financial
Condition.
(a) Attached hereto as Schedule 2.4 is the audited (i) Combined
Consolidated Balance Sheet (the "October Balance Sheet"), (ii) Combined
Consolidated Statement of Operations, (iii) Combined Consolidated Statement of
The Meditrust Companies' Investment, and (iv) Combined Consolidated Statement of
Cash Flows, together with Notes to Combined Consolidated Financial Statements
for the Companies together with their subsidiaries as of October 31, 1998
(collectively, the "October Financial Statements") which (i) includes all
adjustments, consisting of normal recurring adjustments necessary for the fair
presentation of financial position (none of which are material) in accordance
with GAAP consistently applied, except as noted on Schedule 2.4 hereto, and (ii)
present fairly, in all material respects, the financial position and the results
of operations of the Acquired Companies, on a combined consolidated basis with
their subsidiaries as of October 31, 1998 and for the periods covered by such
statements.
(b) Sellers have made available to Buyer copies of each
management letter or other letter delivered to any of the Acquired Companies by
their independent auditors since May 29, 1998 in connection with their audited
financial statements or relating to any review by such independent auditors of
the internal controls of the Acquired Companies during the period ended October
31, 1998 or thereafter, and has made, or will make, available for inspection all
material reports and working papers produced or developed by their independent
auditors (subject to the Buyer's execution and delivery of customary indemnity
agreements for the benefit of such independent auditors) or management in
connection with their examination of such financial statements.
(c) Since May 29, 1998, each of the Acquired Companies have
maintained records relating to their businesses that accurately and validly
reflect their respective transactions in all material respects, and accounting
controls sufficient to insure that such transactions are (i) executed in
accordance with management's general or specific authorization and (ii) recorded
in conformity with GAAP (subject to customary end of period adjustments).
(d) As of the date hereof, none of the Acquired Companies have
liabilities, except for (i) liabilities stated or adequately reserved against on
the October Balance Sheet, (ii) liabilities which arose in the ordinary course
of business after October 31, 1998 consistent with past practice that in the
aggregate do not exceed $250,000 (excluding any liabilities which are included
in the Closing Adjustment), (iii) liabilities which will not have a Material
Adverse Effect, (iv) liabilities set forth on Schedules 2.4 or 2.7 and (v)
liabilities under the Acquired Companies' (A) existing contracts and agreements
disclosed pursuant to Section 2.12(a) hereof or (B) not required to be disclosed
pursuant to Section 2.12(a) hereof. For purposes of this paragraph,
"liabilities" means, all liabilities of the Acquired Companies of any nature,
whether accrued, absolute, contingent or otherwise, asserted or unasserted,
(including, without limitation, liabilities as guarantor or otherwise with
respect to obligations of others, or liabilities for taxes due or then accrued
or to become due or contingent or potential liabilities
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relating to activities of the Acquired Companies or the conduct of their
business prior to the date hereof regardless of whether claims in respect
thereof had been asserted as of such date).
Section 2.5 Absence of Certain Changes. Except as set forth on
Schedule 2.5, from October 31, 1998 to the date of this Agreement, the Acquired
Companies have operated only in the ordinary course of business consistent with
past practice and there has not been any of the following:
(a) change in, or effect on, the Acquired Companies resulting in
a Material Adverse Effect;
(b) change in any Acquired Company's authorized or issued capital
stock; grant of any option, right to purchase or similar right regarding the
capital stock of any Acquired Company; grant of any registration rights by any
Acquired Company; purchase, redemption, retirement, or other acquisition by any
Acquired Company of any such capital stock; or declaration or payment of any
dividend or other distribution or payment in respect of the capital stock of any
Acquired Company, except that cash balances of the Subsidiaries are concentrated
daily in the Companies' accounts, no material cash balances are held by any of
the Acquired Companies and no intercompany payable or receivable is shown on the
October Balance Sheet in connection therewith;
(c) amendment to the certificate or articles of incorporation or
bylaws of any Acquired Company, or any action with respect to the certificate of
incorporation or bylaws of any Acquired Company;
(d) payment of any bonuses, or increase in salaries or other
compensation, by any Acquired Company to any of its directors, officers, or
employees, except for annual bonus awards and increases in salaries consistent
with past practice; or entry into any employment, severance, retention plans,
stay bonus plans or similar agreement or understanding with any director,
officer or employee except for (i) any severance agreement or understanding
under and in accordance with those severance agreements, plans, policies and
understandings ("Severance Arrangements") set forth on Schedule 2.5 (true and
correct copies of the form of all such written agreements (except for exhibits
thereto setting forth the Retention Bonuses referred to in subclause (ii) of
this Section 2.5(d)) are attached hereto as Schedule 2.5) and (ii) retention
incentive payments (the "Retention Bonuses") which will be paid by the Sellers
at or prior to the Closing (which Retention Bonuses may be reflected in the
written agreements evidencing the Severance Arrangements; provided, that,
notwithstanding this inclusion in the agreements evidencing the Severance
Arrangements, the Sellers shall be liable for all such Retention Bonuses);
(e) adoption of, or increase in the schedule of payments or
benefits under, any Benefit Plan (as hereinafter defined), for or with any
officer, director or employee of the Acquired Companies (except for any officer,
director or key employee newly employed or
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promoted since such date, which officers, directors or key employees so newly
employed or promoted are identified on Schedule 2.5 (excluding officers,
directors or employees who are not compensated directly by the Acquired
Companies));
(f) damage to or destruction or loss of any asset or property of
an Acquired Company, whether or not covered by insurance, which has had a
Material Adverse Effect;
(g) sale, purchase, lease, license or other transfer of any share
of capital stock of any Acquired Company or mortgage, pledge, or imposition of
any Encumbrance on any of the shares of capital stock of any Acquired Company;
(h) incurrence of indebtedness or guarantee of debt or other
liability of any third party by any Acquired Company;
(i) material change in the accounting methods or principles used
by the Sellers (with respect to the assets, liabilities, financial condition or
results of operations of any Acquired Company) or any Acquired Company except
for (A) write-downs or write-offs in the value of assets as required or
permitted by GAAP and as set forth on Schedule 2.5, or (B) such adjustments as
required by GAAP as a result of the transactions contemplated by this Agreement;
(j) purchases, leases, sales or dispositions of any asset or
property with a purchase price in excess of $75,000 individually and $250,000 in
the aggregate, purchases or leases of any capital asset for an amount of more
than $75,000 individually and $250,000 in the aggregate except in each case as
provided in the Acquired Companies' capital budget attached as Schedule 2.5 and
Schedule 4.1(c) or the voluntary grant of mortgages, pledges or liens of any of
its properties or assets, except for any such mortgage, pledge or lien which, by
its terms, will be terminated or otherwise be extinguished at or prior to the
Closing;
(k) any capital expenditures or commitment for any capital
expenditure in excess of $75,000 individually or $250,000 in the aggregate,
except in compliance with the capital budgets attached as Schedule 2.5 and
Schedule 4.1(c); or
(l) entering into an agreement, whether oral or written, by the
applicable party bound by clauses (a) through (k), as the case may be, to do any
of the actions described in clauses (a) through (k).
Section 2.6 Consents and Approvals.
(a) Except as set forth on Schedule 2.6(a), the execution,
delivery and performance of this Agreement by the Sellers will not, as of the
Closing Date, require any consent, approval, authorization or other action by,
or filing with or notification to, any federal, state, local, or any foreign
government, governmental, regulatory or administrative
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authority, agency or commission or any court, tribunal, or judicial or arbitral
body, excluding those municipalities or other governmental entities that are
parties to those ground leases disclosed in Schedule 2.12(a), in their capacity
as lessors thereunder, and the City of Escondido, in its capacity as a lender
and/or creditor under those agreements disclosed in Schedule 2.12(a) (a
"Governmental Authority"), except (i) the notification requirements of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), if applicable, (ii) where failure to obtain such consent, approval,
authorization or action, or to make such filing or notification, would not (A)
have a Material Adverse Effect, (B) delay or prevent the consummation of the
transactions contemplated by this Agreement, or (C) have a material adverse
effect on the ability of the Sellers to perform their obligations under this
Agreement, and (iii) as may be necessary as a result of any facts or
circumstances relating solely to the Buyer (including, without limitation, its
sources of financing).
(b) Except as set forth on Schedule 2.6(b), the execution,
delivery and performance of this Agreement by the Sellers will not, as of the
Closing Date, require any third-party consents, approvals, authorizations or
actions, except where failure to obtain such consents, approvals, authorizations
or actions would not (i) have a Material Adverse Effect, (ii) delay or prevent
the consummation of the transactions contemplated by this Agreement, or (iii)
have a material adverse effect on the ability of the Sellers to perform their
obligations under this Agreement.
Section 2.7 Litigation. Except as set forth in Schedule 2.7, there is
no action, suit or proceeding, claim, arbitration or investigation against an
Acquired Company pending or, to the Sellers' Knowledge, threatened, which, if
adversely determined, (a) would have a Material Adverse Effect, (b) would delay
or prevent the consummation of the transactions contemplated by this Agreement,
or (c) would have a material adverse effect on the ability of the Sellers to
perform their obligations under this Agreement.
Section 2.8 Taxes.
(a) Except as set forth on Schedule 2.8 or as would not have a
Material Adverse Effect:
(i) The Acquired Companies have paid or caused to be paid and
will as of the Closing Date pay or cause to be paid all Taxes (as defined in
Section 2.8(b)) required to be so paid prior to the date of this Agreement and
prior to the Closing Date and have made provision, in accordance with GAAP, for
all Taxes owed or accrued through the date of this Agreement.
(ii) The Acquired Companies have timely filed or been
included in, or will timely file or be included in, all material Tax Returns (as
defined in Section 2.8(b)) required to be filed by them or in which they are
required to be included with respect to Taxes for any period ending on or before
the date of this Agreement and on or before the Closing
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Date, taking into account any extension of time to file granted to or obtained
on behalf of the Sellers or the Acquired Companies. All such filed Tax Returns
are complete and accurate in all material respects.
(iii) Neither the Internal Revenue Service (the "IRS") nor
any other Governmental Authority is asserting as of the date of this Agreement
by written notice to Sellers or the Acquired Companies or, to the Sellers'
Knowledge, threatening as of the date of this Agreement to assert against the
Sellers or the Acquired Companies, any deficiency or claim for any material
amount of additional Taxes.
(iv) No federal, state, local or foreign audits or other
administrative proceedings or court proceedings are pending as of the date of
this Agreement with regard to any Taxes or Tax Returns of any of the Sellers or
the Acquired Companies and none of Sellers or the Acquired Companies has
received a written notice prior to the date of this Agreement of any actual or
threatened audits or proceedings or is otherwise aware of any such audits or
proceedings.
(v) There are no agreements, waivers or arrangements
currently in effect which extend the statutory period of limitation applicable
to any claim for, or the period for the collection or assessment of, Taxes due
from or with respect to the Acquired Companies for any taxable period, and no
powers of attorney have been granted by or with respect to the Acquired
Companies with respect to Taxes which are currently in force. No closing
agreement pursuant to Section 7121 of the Code (or any predecessor provision) or
any similar provision of any state, local, or foreign law has been entered into
by or with respect to the Acquired Companies which is currently in force or
effect.
(vi) As of the Closing Date, MGG, MGG II and their respective
Subsidiaries (excluding only Ocean Vista Land Company and its Subsidiaries (if
any)) will be "Qualified REIT Subsidiaries" within the meaning of Section 856(i)
of the Code.
(b) "Taxes" shall mean any and all taxes, charges, fees, levies
or other assessments, including, without limitation, income, gross receipts,
excise, real or personal property, sales, withholding, social security,
retirement, unemployment, occupation, service, use, license, net worth, payroll,
franchise, transfer and recording bites, fees and charges, imposed by the IRS or
any taxing authority (whether domestic or foreign including, without limitation,
any state, county, local or foreign government or any subdivision or taxing
agency thereof (including a United States possession)), whether computed on a
separate, consolidated, unitary, combined or other basis; and such term shall
include any interest whether paid or received, fines, penalties or additional
amounts attributable to, or imposed upon, or with respect to, any such taxes,
charges, fees, levies or other assessments.
"Tax Return" shall mean any report, return, document, declaration
or other information or filing required to be supplied to any taxing authority
or jurisdiction
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(foreign or domestic) with respect to Taxes, including, without limitation,
information returns, any document, with respect to or accompanying payments of
estimated taxes, or with respect to or accompanying requests for the extension
of time in which to file any such, report, return, document, declaration or
other information.
Section 2.9 Employee Benefit Plans. All of the employee benefit
plans, programs and arrangements maintained for the benefit of any current or
former employee, officer or director or any dependents or beneficiaries of such
individuals of any of the Acquired Companies (the "Benefit Plans") are listed on
Schedule 2.9. With respect to such Benefit Plans, except for such matters as,
individually or in the aggregate, would not have a Material Adverse Effect or as
set forth in Schedule 2.9, (a) each Benefit Plan and any related trust intended
to be qualified under Sections 401(a), 501(a) or 501(c) of the Code has received
a favorable determination letter from the IRS that it is so qualified and
nothing has occurred since the date of such letter that could reasonably be
expected to adversely affect the qualified status of such Benefit Plan or
related trust, (b) each Benefit Plan has been operated in all material respects
in accordance with the terms and requirements of applicable law including
requirements under ERISA and the Code (including COBRA requirements under
Section 4980B of the Code), (c) none of the Acquired Companies has incurred any
direct or indirect liability under, arising out of or by operation of Title I or
Title IV of the Employee Retirement and Income Security Act of 1974, as amended
("ERISA"), in connection with any Benefit Plan or other retirement plan or
arrangement, and to Sellers' Knowledge no fact or event exists that could
reasonably be expected to give rise to any such liability, (d) all contributions
due and payable on or before the date of this Agreement in respect of each
Benefit Plan have been made in full and in proper form and as of the Closing,
neither the Acquired Companies nor Buyer shall have or assume any liability that
is unfunded or unaccrued related to any Benefit Plan, (e) none of the Acquired
Companies have ever sponsored or been obligated to contribute to any
"multiemployer plan" (as defined in Section 3(37) of ERISA), "multiple employer
plan" (as defined in Section 413 of the Code) or "defined benefit plan" (as
defined in Section 3(35) of ERISA) and/or Section 412 of the Code, or "excess
benefit plan" or "top-hat plan" as described under ERISA Sections 3(36) and
201(2), (f) except as set forth on Schedule 2.9 and, except as otherwise
required under ERISA, the Code and applicable state laws, no Benefit Plan
currently or previously maintained by the Acquired Companies provides any
post-retirement health or life insurance benefits, and none of the Acquired
Companies maintains any obligations to provide post-retirement health or life
insurance benefits in the future, (g) all reporting and disclosure obligations
imposed under ERISA and the Code have been satisfied with respect to each
Benefit Plan, (h) each Benefit Plan maintained for the benefit of any current or
former employee, officer or director of any of the Acquired Companies is listed
on Schedule 2.9 and true and complete copies of the current plan documents for
each such Benefit Plan have been provided to Buyer, and (i) except as set forth
on Schedule 2.9, no benefit or amount payable or which may become payable by the
Acquired Companies pursuant to any Benefit Plan, agreement or contract with any
employee, shall constitute an "excess parachute payment," within the meaning of
Section 280G of the Code, which is or may be subject to the imposition of any
excise tax under Section 4999 of the Code or which could not reasonably be
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expected to be deductible by reason of Section 280G of the Code. "ERISA
Affiliate" means any corporation, trade or business the employees of which,
together with the employees of the Acquired Companies, are required to be
treated as employed by a single employer under the provisions of ERISA or Code
Section 414. Neither the Acquired Companies nor Buyer shall have any liability
on or after the Closing with respect to any employee benefit plan, arrangement,
program or policy maintained or sponsored by any ERISA Affiliate, except for the
Benefit Plans listed on Schedule 2.9.
Section 2.10 Assets; Properties. Except as disclosed herein or as
would individually or in the aggregate not have a Material Adverse Effect, the
Sellers represent as follows:
(a) Marketable Title. To the Sellers' Knowledge, except for
Property Restrictions (as defined in Section 2.10(c) hereof) and except as
disclosed on Schedule 2.10(a), the Acquired Companies own good and marketable
fee simple title to all of the Owned Properties, free and clear of any liens or
security interests. For purposes of this Agreement "Owned Properties" shall
mean: (i) the real property set forth on Schedule 2.10(a) hereto or purchased
since the date of this Agreement (collectively, the "Land"); (ii) all existing
buildings, structures and other improvements, located upon the Land owned by the
Acquired Companies, including without limitation all clubhouse buildings,
maintenance facilities, golf courses, driving ranges, practice areas,
landscaping improvements, man-made lakes, irrigation systems (including
sprinklers, pipe, and fittings), lakeliners, pumps, flood control works, paving,
walkways, road improvements, parking facilities and all other improvements of
whatever kind owned by the Acquired Companies which have previously been made,
installed or erected and are now located on the Land (collectively, the
"Improvements"); and (iii) all appurtenances, hereditaments, easements,
reversionary rights, and all other rights, privileges, and entitlements
belonging to or running with the Land owned by the Acquired Companies.
(b) Improvements in Operable Condition. To the Sellers'
Knowledge, except for Property Restrictions and except as set forth on Schedule
2.10(b), (i) the Acquired Company identified therein holds a good and marketable
leasehold interest (each, a "Leasehold") in the Leased Property pursuant to a
valid ground lease (each, a "Lease"), each of the Leases at present and
immediately prior to the Closing shall be in full force and effect, the Acquired
Company which is the lessee thereunder is not, nor will it be at Closing, in
default under any Lease in respect of any monetary obligation or otherwise in
any material respect, subject however to obtaining the consents identified on
Schedule 2.6(b) as it relates to the Leases, and each of the Leases represents
the complete agreement between such Acquired Company and the lessor thereunder
and all material (ii) (A) Improvements and (B) Leased Improvements are in
operable condition and the Sellers have the right to possess, occupy and operate
same, free and clear of any liens or security interests. "Leased Improvements"
include all existing buildings, structures and other improvements located upon
each of the parcels of real property comprising a golf facility leased by the
Acquired Companies (the "Leased Properties") as set forth on Schedule 2.10(b)
hereto or leased since the date of this Agreement, which buildings, structures
and other improvements include without limitation all clubhouse
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buildings, maintenance facilities, golf courses, driving ranges, practice areas,
landscaping improvements, man-made lakes, irrigation systems (including
sprinklers, pipes and fittings), lakeliners, pumps, flood control works, paving,
walkways, road improvements, parking facilities, and all other improvements of
whatever kind owned by the Acquired Companies which have previously been made,
installed or erected and are now located on such Leased Properties
(collectively, the "Leased Improvements," and together with the Leaseholds, the
Improvements, the Owned Properties and the Leased Properties, the "Properties").
(c) Property Restrictions. To the Sellers' Knowledge, except as
set forth below and as set forth on Schedule 2.10(c) hereto, the Properties are
not subject to any easements, rights of way, covenants, conditions,
restrictions, reservations, leases or other rights of occupancy, laws,
ordinances and regulations affecting building use or occupancy or reservations
of an interest in, or exception to or defect in title (collectively, "Property
Restrictions"), except for (i) Property Restrictions imposed or promulgated by
law or any Governmental Authority with respect to real property, including
zoning regulations that do not and as a consequence of the transactions
contemplated herein will not adversely affect the current use of the property,
materially detract from the value of or materially interfere with the present
use of the property, (ii) Encumbrances and Property Restrictions disclosed on
existing title policies, commitments (and the documents listed as exceptions,
therein), reports certificates of title, title opinions or current surveys (in
each case limited to only those title policies, commitments (and the documents
listed as exceptions therein), reports and surveys that were delivered or made
available to the Buyer for review prior to the date of this Agreement, but
excluding any monetary liens, vendors' liens, mechanic's and materialmen's
liens, judgment liens and other third party monetary liens except as set forth
on, or securing the debt listed on, Schedule 2.12(a)(ii)), (iii) any other item
currently of record in the applicable land or comparable real property records
that does not materially detract from the value of or materially interfere with
the present use of the applicable Property, and (iv) all obligations under the
existing contracts and agreements entered into by the Acquired Companies and
listed on Schedule 2.12(a) or not required to be disclosed on such schedule,
including those mechanics', carriers', suppliers', workmen's or repairmen's
liens and other Encumbrances, Property Restrictions and other limitations of any
kind, if any, which, individually or in the aggregate, are not material in
amount, do not and as a consequence of the transactions contemplated herein will
not materially detract from the value of or materially interfere with the
present use of any of the Properties subject thereto or affected thereby, do not
and as a consequence of the transactions contemplated herein will not otherwise
materially impair business operations conducted by the Acquired Companies and
which have been incurred only in the ordinary course of business.
Notwithstanding the foregoing, Sellers shall be deemed to have Sellers'
Knowledge, but not to have disclosed on a schedule attached hereto, matters
currently of record which are monetary liens, vendors' liens, mechanic's and
materialmen's liens, judgment liens and other third-party monetary liens except
as set forth on Schedule 2.12(a)(ii) but only if and to the extent identified in
writing by the Buyer and received by the Sellers prior to 6:00 p.m. (local
Boston, Massachusetts time) on Wednesday, February 17, 1999, it being agreed
that all such disclosed items shall be deemed to be a breach
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of such representation for the purpose of Section 8.2(a)(i) hereof to the extent
not cured at or prior to Closing.
(d) Taxes. Except as set forth on Schedule 2.10(d) and for any
proceeding or appeal which, if determined adversely to the respective Acquired
Company, individually or in the aggregate, would not have a Material Adverse
Effect, there are no outstanding abatement proceedings or appeals to which the
Acquired Companies are a party with respect to the assessment of any of the
Properties for the purpose of real property taxes, and there are no agreements
with any Governmental Authority to which the Acquired Companies are a party with
respect to such assessments or tax rates on any of the Properties.
Section 2.11 Labor and Employment Matters.
(a) Except as set forth on Schedule 2.11(a) and as would not have
a Material Adverse Effect, the Acquired Companies are, as of the date hereof, in
compliance in all material respects with all federal, state and municipal laws
respecting employment and employment practices, terms and conditions of
employment, and wages and hours, including but not limited to ERISA, the Code,
Title VII of the Civil Rights Act of 1964, as amended, the Equal Pay Act of
1967, as amended, the Age Discrimination in Employment Act of 1967, as amended,
the Americans with Disabilities Act and the related rules and regulations
adopted by those federal agencies responsible for the administration of such
laws, and there are no arrearages in the payment of wages, social security tax
or any other employment related levy or tax.
(b) Except as set forth on Schedule 2.11(b) and as would not have a
Material Adverse Effect, none of the Acquired Companies is a party to or
otherwise bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization. Except as
set forth on Schedule 2.11(b) and as would not have a Material Adverse Effect,
as of the date of this Agreement, none of the Acquired Companies is subject to
any charge, demand, petition or representation proceeding seeking to compel,
require or demand it to bargain with any labor union or labor organization nor,
as of the date of this Agreement, is there pending or, to the Sellers'
Knowledge, threatened, any material labor strike, dispute, walkout, work
stoppage, slow-down or lockout involving the Acquired Companies.
Section 2.12 Contracts and Commitments.
(a) Schedule 2.12(a) lists each of the following contracts or
agreements (if any) of each of the Acquired Companies:
(i) management contracts with respect to the Properties, and
management contracts with respect to golf course properties or facilities owned
by third parties;
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(ii) all material documents evidencing or creating
indebtedness for borrowed money of the Acquired Companies with a remaining
principal balance in excess of $75,000 individually or $250,000 in the aggregate
or secured by the Properties and outstanding on the date of this Agreement which
will not be retired or repaid on or prior to the Closing Date ("Existing Debt");
(iii) partnership agreements and joint venture agreements to
which any Acquired Company is a party (and having as another party any person
who is not an Acquired Company) which requires a payment, or delivery of assets
or services;
(iv) all Leases of Leased Properties and other real property
leased by the Companies;
(v) except as set forth on Schedule 2.5, employment,
severance or consulting agreements with any director, officer or Acquired
Companies Employee (as hereinafter defined) requiring an annual payment of cash
compensation in excess of $100,000 individually;
(vi) agreements granting to any third party a first-refusal,
first-offer or other right to purchase or acquire any of the Properties or any
of the Acquired Shares;
(vii) agreements materially limiting or restricting the
ability of any Acquired Company to enter into or engage in any geographic area
or line of business; and
(viii) agreements that will not be terminated on or before
the Closing between (1) any Acquired Company and any Seller or its Affiliates
(as hereinafter defined), or (2) any Seller or its Affiliates (except for any
Acquired Company) and a third party that commit any one or more of the Acquired
Companies to pay, in the aggregate, more than $150,000.
(b) True and complete copies of the contracts and agreements
disclosed pursuant to Section 2.12(a) hereof have been made available to the
Buyer. Except as disclosed on Schedule 2.12(b) or as would not have a Material
Adverse Effect (i) each contract and agreement disclosed pursuant to Section
2.12(a) hereof is valid and binding on the Acquired Company party thereto and,
to the Sellers' Knowledge, on the other party or other parties thereto, and is
in full force and effect in accordance with its respective terms, (ii) upon
consummation of the transactions contemplated by this Agreement, each such
contract and agreement shall continue in full force and effect in accordance
with its respective terms without penalty, acceleration of payment or other
adverse consequence, (iii) none of the Acquired Companies is in breach of, or
default under, any such contract or agreement, and no event exists that, but for
the giving of notice or passage of time, would result in such a breach or
default by the Acquired Company party thereto, and (iv) to the Sellers'
Knowledge, no other party to any such contract or agreement is in breach thereof
or default thereunder, and no event
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exists that, but for the giving of notice or passage or time, would result in
such a breach or default by the other party thereto. Certain other contracts and
agreements concerning the Properties and the Acquired Companies have been
provided to the Buyer in the Review Room (as hereinafter defined).
Section 2.13 Intellectual Property. Except as set forth on Schedule
2.13, to Sellers' Knowledge, the Sellers own or have the right to use all
trademarks, trade names, service marks, trade secrets, copyrights and other
intellectual property rights (collectively, the "Intellectual Property Rights"),
as are used or necessary in connection with the business of the Acquired
Companies taken as a whole, except where the failure to own or have the right to
use such Intellectual Property Rights would not have a Material Adverse Effect.
Except as disclosed on Schedule 2.13 or as would not have, either individually
or in the aggregate, a Material Adverse Effect, to the Sellers' Knowledge, the
rights of any Acquired Company in or to the Intellectual Property Rights do not
conflict with or infringe on the rights of any other Person, and none of the
Sellers, nor the Acquired Companies has received any claim or written notice
from any Person, to such effect.
Section 2.14 Environmental Matters. Except as disclosed on Schedule
2.14 and except for any matter which would not result in a Material Adverse
Effect, to Sellers' Knowledge, (a) the Acquired Companies are in compliance in
all material respects with all applicable Environmental Laws (as hereinafter
defined), (b) there are no material Environmental Liabilities and Costs (as
hereinafter defined) of the Acquired Companies, (c) there are no material
Environmental Conditions (as hereinafter defined) on or related to the
Properties, (d) none of the Acquired Companies has received any written notice
prior to the date of this Agreement from any governmental agency or other third
party alleging any violation of, or noncompliance with, any Environmental Law,
or requiring the removal, clean-up, or remediation of any Environmental
Condition, whether or not on any of the Properties relating to the Acquired
Companies, which such matter has not been resolved as of the date of this
Agreement, and (e) the Acquired Companies have not received written notice prior
to the date of this Agreement that they are subject to any enforcement or
investigatory action by any governmental agency regarding an Environmental
Condition with respect to any Property, which such matter has not been resolved
as of the date of this Agreement. As used herein, the terms "toxic" or
"hazardous" wastes, substances or materials shall include, without limitation,
all those so designated in and in any way regulated by any current Environmental
Laws. The Acquired Companies have previously made available to the Buyer copies
of all of the following written materials in their possession or control: copies
of any environmental audits, site assessments, documentation regarding off-site
disposal of hazardous materials, and material correspondence with any federal,
state or local government, administrative agency, or other Governmental
Authority, regarding the foregoing (the "Environmental Reports").
For purposes of this Agreement, the following definitions shall
apply:
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"Environmental Laws" means all applicable federal, state and local
statutes or laws, judgments, orders, regulations, licenses, permits, rules and
ordinances relating to pollution or protection of health, safety or the
environment, including, but not limited to the Federal Water Pollution Control
Act (33 U.S.C. ss.1251 et seq.), Resources Conservation and Recovery Act (42
U.S.C. ss.6901 et. seq.), Safe Drinking Water Act (42 U.S.C. ss.3000(f) et.
seq.), Toxic Substances Control Act (15 U.S.C. ss.2601 et seq.), Clean Air Act
(42 U.S.C. ss.7401 et. seq.), Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. ss.9601 et seq.), and other similar state and local
statutes.
"Environmental Condition" means the introduction into the environment
of any contaminant, pollutant, hazardous or toxic waste, substance or material
(whether or not upon the Owned Properties or the Leased Properties) at levels or
in amounts in excess of applicable legal or regulatory permits, limits or
standards, as a result of which the Acquired Companies, with respect to this
Section 2.14, (1) have or may become liable to any Person or Governmental
Authority, (2) are in violation of any Environmental Law, or (3) by reason of
which any of the properties or other assets of the Acquired Companies, with
respect to this Section 2.14, may suffer or be subject to any lien.
"Environmental Liabilities and Costs" means all liabilities,
obligations, responsibilities, obligations to conduct cleanup, losses, damages,
deficiencies, punitive damages, costs and expenses (including, without
limitation, all reasonable fees, disbursements and expenses of counsel, expert
and consulting fees and costs of any necessary investigations and feasibility
studies and responding to government requests for information or documents),
fines, penalties, monetary sanctions, known or unknown, absolute or contingent,
past, present or future, resulting from any claim or demand, by any Person or
Governmental Authority, whether based in contract, tort, implied or express
warranty, strict liability, joint and several liability, criminal or civil
statute, under any Environmental Law, or arising from Environmental Conditions,
as a result of past or present ownership, leasing or operation of any
properties, owned, leased or operated by the Acquired Companies with respect to
Section 2.14.
Section 2.15 Compliance with Laws; Permits. Except as set forth on
Schedule 2.15, (i) none of the Acquired Companies (excluding for such purpose
all of their respective properties or assets) are in violation of any federal,
state, local or foreign judgement, order, decree, statute, law, ordinance, rule,
regulation, code and any judicial or administrative interpretation thereof, or
any other government or rule of law ("Law") or order of any Governmental
Authority ("Governmental Order") applicable to any of the Acquired Companies
except such violations as would not have a Material Adverse Effect and (ii) to
the Sellers' Knowledge, none of the Acquired Companies (including for such
purpose only all of their respective properties or assets) are in violation of
any Law or Governmental Order applicable to any such properties or assets,
except such violations as would not have a Material Adverse Effect. The Acquired
Companies have obtained all licenses, permits and other authorizations and have
taken all actions required by applicable law or governmental
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regulations in connection with their business as now or as previously conducted
where the failure to obtain any such license, permit or authorization or to take
any such action, individually or in the aggregate, would have a Material Adverse
Effect.
Section 2.16 Insurance. Schedule 2.16 sets forth a true and correct
summary of the insurance policies held by, or for the benefit of, the Acquired
Companies including the underwriter of such policies and the amount of coverage
thereunder. To the Sellers' Knowledge, such insurance policies are valid and
currently in effect. The Sellers or the Acquired Companies have paid, or caused
to be paid, all premiums due under such policies and are not in default with
respect to any monetary obligations under such policies in any material respect.
Section 2.17 Brokers. No broker, investment banker, financial advisor
or other Person, other than Xxxxxxx Xxxxx & Co., the fees and expenses of which
will be paid by the Sellers, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement.
Section 2.18 Disclaimer; Knowledge; Disclosure; Material Adverse
Effect.
(a) The Sellers do not make, and have not made, any
representations or warranties relating to the Sellers, the Acquired Companies,
the Properties, or the operations or businesses of the Sellers or the Acquired
Companies, or the businesses or operations conducted on, at or with respect to
the Properties, or otherwise in connection with the transactions contemplated
hereby, other than those expressly made by Sellers in this Agreement. Without
limiting the generality of the foregoing, except only as expressly set forth in
those representations and warranties made in Section 2.1 through 2.17 hereof
(but subject to the limitations set forth in Section 2.18(b) below), the Sellers
have not made, and shall not be deemed to have made, any representations or
warranties in any presentation of the businesses of the Acquired Companies
(including without limitation any management presentation or property or
facility tour) in connection with the transactions contemplated hereby, and no
statement made in any such presentation (including without limitation any
management presentation or property or facility tour) shall be deemed a
representation or warranty hereunder or otherwise. It is understood that any
cost estimates, projections or other predictions, any data, any financial
information, document, reports, sales brochure or other literature, maps or
sketches, financial information, or statements, or presentations (including
without limitation any management presentation or property or facility tour), or
any memoranda or offering materials including, without limitation, that certain
"Confidential Information Memorandum" dated November 1998 and any materials or
information contained therein and any amendments or supplements thereto (the
"Confidential Memorandum"), are not and shall not be deemed to be or to include
representations or warranties of the Sellers or the Acquired Companies, except
only as expressly set forth in those representations and warranties made in
Section 2.1 through 2.17 hereof (but subject to the limitations set forth in
Section 2.18(b) below), and the Buyer acknowledges that it has not relied and is
not relying on
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any such estimates, projections, predictions, data, financial information,
memoranda, offering materials or presentations (including without limitation any
management presentation or property or facility tour), including without
limitation, the Confidential Memorandum. No Person has been authorized by the
Sellers or the Acquired Companies to make any representation or warranty
relating to the Sellers, the Acquired Companies, the Properties, the businesses
of the Sellers or the Acquired Companies, or the businesses or operations
conducted on, at or with respect to the Properties, or otherwise in connection
with the transactions contemplated hereby and, if made, such representation or
warranty must not be relied upon as having been authorized by the Sellers or the
Acquired Companies.
(b) Prior to the Closing Date, the Buyer will have had the
opportunity to make all inspections and investigations, including a review of
the materials located in the due diligence review room (the "Review Room") at
the offices of Xxxxxxx, Procter & Xxxx LLP, concerning the Acquired Companies
and the Properties, which the Buyer deems necessary or desirable to protect its
interest in acquiring the Acquired Companies and their respective assets,
including without limitation, the Properties. The representations and warranties
herein are fully qualified by any matters disclosed in the items described or
otherwise listed in Schedule 2.18(b) hereto (but subject to the limitations
contained in such Schedule 2.18(b)) (the "Qualifying Materials"). By way of
explanation and not in supplementation of the preceding sentence, it is
specifically acknowledged and agreed by the parties hereto, as a material
inducement to the Sellers entering into this Agreement in the form hereof,
without which agreement Sellers would be unwilling to enter into this Agreement
in the form hereof, that any and all representations and warranties contained in
this Agreement, the accuracy of which could be confirmed or denied based upon
any material present in the Qualifying Materials, shall be null and void and
deemed deleted from this Agreement for all purposes. Except as otherwise
expressly set forth in this Agreement, neither the Sellers nor anyone acting for
or on behalf of the Sellers has made any representation, warranty, promise or
statement (including without limitation in the cover memorandum delivered with
the form Stock Purchase Agreement to each prospective buyer on or about December
23, 1998), express or implied, to the Buyer on which the Buyer has relied
concerning the Acquired Companies and the Properties or the condition or use
thereof. As a material inducement to the execution and delivery of this
Agreement by the Sellers, the Buyer agrees that, except as otherwise expressly
provided herein (but subject to the limitations contained in this Section 2.18),
at the Closing Date, the Buyer will acquire the Properties in an "as-is"
physical condition and in an "as-is" state with all faults, subject only to the
expressed representations and warranties set forth in this Agreement.
Notwithstanding anything herein to the contrary, the Buyer waives and the
Sellers disclaim all implied warranties of any type or kind with respect to the
Properties.
(c) Whenever a representation or warranty made by the Sellers
herein refers to the knowledge of the Sellers, or to the "Sellers' Knowledge,"
it shall be deemed to refer only to the actual knowledge (and not constructive,
imputed or implied knowledge) on the date hereof and on the Closing Date, as
applicable, of Xxxxx X. Husband, Xxxxxx X. Xxxxxxxx, Xxxxxx Xxxxxxx, Xxxx X.
Xxx, Xxxxx Xxxxxxxx, Xxxxxxx X. Xxxxx, Xxxxx Xxxx, Xxxx X.
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Xxxxxxxxxx, Xxxx Xxxxxxxxxx, Xxxxx X. Xxxxx, Xxx Xxxxxxxx, Xxx Xxxxxx, Tighue
Xxxxxxx, Xxx Dznowski, Jr., Xxxx Xxxxx, Xxxx Xxxxxx, Xxxx Xxxxxxxx, Xxxxx Xxxxx,
Xxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxxxx and Xxxxxx X. Xxxxxx, none of whom shall
have any personal liability or obligations regarding such knowledge. The Sellers
have not undertaken, nor shall they have any duty to undertake, any
investigation concerning any matter as to which a representation or warranty is
made as to its "Knowledge."
(d) Notwithstanding anything to the contrary contained in this
Agreement or in any of the schedules attached hereto, any information disclosed
in one schedule shall be deemed to be disclosed in all schedules provided that
the information so disclosed is disclosed with the requisite degree of
specificity in order to qualify, or disclose for the purposes of, such other
schedule. Certain information set forth in the schedules is included solely for
informational purposes and may not be required to be disclosed pursuant to this
Agreement. The disclosure of any information shall not be deemed to constitute
an acknowledgment that such information is required to be disclosed in
connection with the representations and warranties made by the Sellers in this
Agreement or that it is material, nor shall such information be deemed to
establish a standard of materiality. The Sellers have prepared the schedules to
this Agreement in good faith and without regard to any applicable "Material
Adverse Effect" or other "materiality" qualifier, provided, however, that
notwithstanding such standard of preparation, nothing contained herein shall
limit or otherwise qualify the standard of the representations and warranties
contained in Sections 2.1 through 2.17 hereof for the purposes of determining
the existence of a breach of any such representation or warranty.
(e) "Material Adverse Effect" means any change in, or effect on,
the Acquired Companies, taken as a whole, that is (individually or in the
aggregate with any other changes therein or effects thereon that would be
specifically addressed by a representation or warranty contained in this
Agreement but for a "Material Adverse Effect" exception or qualification)
materially adverse to the business, operations, assets, liabilities, financial
condition or results of operations or prospective business and earnings
(assuming such prospective business is conducted in a manner consistent with
prior business operations) of the Acquired Companies, taken as a whole, other
than any such changes or effects resulting from any of the following, the change
in or effect of which shall not constitute or result in (i) a Material Adverse
Effect or (ii) a breach of a representation or warranty under this Article II:
(A) changes in general (national, regional or local) economic, regulatory or
political conditions or changes in the golf course industry generally, or (B)
this Agreement, the transactions contemplated hereby, or any announcement or
indication thereof, or any actions taken by the Buyer hereunder or in
contemplation hereof, or any actions which a Seller was required to take,
hereunder, or any direct contact of the Buyer or any of its representatives with
any of the customers or suppliers, or potential customers or suppliers, or any
of the employees of, the Acquired Companies (including any departure of any such
employee).
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
Section 3.1 Organization of the Buyer; Authority.
(a) The Buyer is a duly formed, validly existing and in good
standing under the laws of the State of Delaware and has all the requisite
corporate power and authority to enter into this Agreement, to carry out its
obligations hereunder and to consummate the transactions contemplated hereby.
The Buyer is qualified to do business in each jurisdiction in which the nature
of its business requires it to be so qualified except to the extent the failure
to so qualify would not, either individually or in the aggregate, have a
material adverse effect on the ability of the Buyer to perform its obligations
under this Agreement.
(b) The execution and delivery of this Agreement, the performance
by the Buyer of its obligations hereunder and the consummation of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of the Buyer. This Agreement has been duly executed
and delivered by the Buyer and assuming the due authorization, execution and
delivery of this Agreement by the Sellers, this Agreement constitutes a legal,
valid and binding obligation of the Buyer, enforceable against the Buyer in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by general equitable principles.
Section 3.2 No Conflict. Except as provided in Schedule 3.2, and
except as may result from any facts or circumstances related solely to the
Sellers, and assuming that all consents, approvals, authorizations and other
actions described in Section 3.3 have been obtained and all filings and
notifications listed in Schedule 3.3(a) have been made, neither the Buyer nor
any of its subsidiaries is subject to or bound:
(a) to Buyer's Knowledge (as hereinafter defined), by any
provision of any law, statute, rule, regulation or judicial or administrative
decision,
(b) by the provisions of any articles or certificate of
incorporation or by-laws, (or similar organizational, constitutive or governing
document) of the Buyer,
(c) to Buyer's Knowledge, by any provision of any mortgage,
deed of trust, lease, note, shareholders' agreement, partnership agreement,
bond, indenture, license, permit, trust, contract, agreement, sublease,
franchise or other instrument or arrangement to which the Buyer is a party as it
relates to the business of the Buyer or by which any of such assets or
properties are bound or affected, or
(d) by any provision of any judgment, order, writ, injunction
or decree of any court, governmental body, administrative agency or arbitrator,
that would prevent, violate
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or conflict with or under which there would be a default as a result of the
execution, delivery or performance of this Agreement, nor, is the consent of any
person or entity under any material contract or agreement or under federal or
state law, which has not been obtained prior to the Closing, required for the
execution, delivery, and performance by the Buyer of this Agreement and the
transactions contemplated thereby, except for violations, defaults, conflicts or
failures to obtain consents or to make filings or provide notices which would
not have a material adverse effect on the Buyer or a material adverse effect on
the ability of the Buyer to perform its obligations under this Agreement.
Section 3.3 Consents and Approvals.
(a) To the Buyer's Knowledge, except as set forth on Schedule
3.3(a), the execution, delivery and performance of this Agreement by the Buyer
will not, as of the Closing Date, require any consent, approval, authorization
or other action by, or filing with or notification to, any Governmental
Authority, except (i) the notification requirements of the HSR Act, if
applicable, (ii) where failure to obtain such consent, approval, authorization
or action, or to make such filing or notification, would not have a material
adverse effect on the ability of the Buyer to perform its obligations under this
Agreement, and (iii) as may be necessary as a result of any facts or
circumstances relating solely to the Sellers.
(b) Except as set forth on Schedule 3.3(b), the execution,
delivery and performance of this Agreement by the Buyer will not, as of the
Closing Date, require any third-party consents, approvals, authorizations or
actions, except where failure to obtain such consents, approvals, authorizations
or actions would not have a material adverse effect on the ability of the Buyer
to perform its obligations under this Agreement.
Section 3.4 Litigation. There is no action, suit or proceeding,
claim, arbitration or investigation against the Buyer or, to the Buyer's
Knowledge, threatened, which, if adversely determined, (a) would delay or
prevent the consummation of the transactions contemplated by this Agreement, or
(b) would have a material adverse effect on the ability of the Buyer to perform
its obligations under this Agreement. To the Buyer's Knowledge, the Buyer is not
subject to any Governmental Order (nor, to the Buyer's Knowledge, are there any
such Governmental Orders threatened to be imposed by any Governmental Authority)
which (x) would delay or prevent the consummation of the transactions
contemplated by this Agreement, or (y) would have any material adverse effect on
the ability of the Buyer to perform its obligations under this Agreement.
Section 3.5 Financing. The Buyer has, or has available to it, all
funds necessary to consummate the transactions contemplated by this Agreement.
Section 3.6 Brokers. No broker, investment banker, financial advisor
or other Person, other than NationsBanc Xxxxxxxxxx Securities, the fees and
expenses of which will be
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paid by the Buyer, is entitled to any broker's, finder's, financial advisor's or
other similar fee, commission or expense in connection with the transactions
contemplated by this Agreement.
Section 3.7 Investment Intent. The Buyer is acquiring the Acquired
Shares solely for the purpose of investment and not with a view to, or for offer
or sale in connection with, any distribution thereof.
Section 3.8 Buyer's Knowledge. Whenever a representation or warranty
made by Buyer herein refers to the knowledge of Buyer, or to the "Buyer's
Knowledge" it shall be deemed to refer only to the actual knowledge (and not
constructive, imputed or implied knowledge) on the date hereof and on the
Closing Date, as applicable, of Xxxxxx X. Xxxxxx, Xx., and Xxxxx X. Xxxxxx, none
of whom shall have any personal liability or obligations regarding such
knowledge. The Buyer has not undertaken, nor shall it have any duty to
undertake, any investigation concerning any matters as to which a representation
or warranty is made as to its "Knowledge."
ARTICLE IV
CERTAIN COVENANTS AND AGREEMENTS OF THE BUYER AND SELLER
Section 4.1 Conduct of Business Prior to Closing.
(a) The Sellers covenant and agree that, between the date hereof
and the Closing Date, they shall cause the Acquired Companies to operate in the
ordinary course of business, consistent with past practice, except as otherwise
provided in this Agreement and except: (i) as otherwise contemplated by this
Agreement; (ii) as permitted by Section 4.1(b), that the Acquired Companies may
not distribute cash and cash equivalents to one or more of the Sellers on or
prior to the Closing Date; and (iii) that the rights (if any) of REITCO in and
to, and the obligations under or arising from, (x) the tradename "Cobblestone"
and (y) that certain license agreement by and among REITCO, as successor by
merger to Cobblestone Holdings, Inc., MGG and Cobblestone, pursuant to which
REITCO and MGG currently license certain rights in and to the tradename
"Cobblestone" will be assigned by REITCO to MGG prior to the Closing and (iv)
that the Sellers or their Affiliates (including the Acquired Companies) may
transfer shares of capital stock of the Acquired Companies so long as (A) the
Sellers transfer to the Buyer pursuant to Article I hereof, all of the issued
and outstanding Acquired Shares, and (B) the Companies own all of the issued and
outstanding capital stock of their Subsidiaries, except as disclosed on the
Schedules hereto.
Without limiting the generality of the foregoing, from the date
hereof until the Closing, except as required by this Agreement and except for
transactions expressly approved in writing by Buyer, which approval shall not be
unreasonably withheld, Sellers shall use commercially reasonable efforts to:
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(A) Maintain inventories and pre-paid expenses at
current levels, except for purchases and/or sales
in the ordinary course of business, and maintain
the properties and assets of the Acquired
Companies in good repair, order and condition,
reasonable wear and tear and involuntary casualty
and condemnation excepted;
(B) Maintain and keep in full force and effect (I)
all insurance on the Acquired Companies' assets
and property, (II) the insurance for the benefit
of employees of the Acquired Companies, (III) all
liability and other casualty insurance, and (IV)
all bonds on personnel, which, in each case, are
currently in effect, or commercially reasonable
substitutions therefor;
(C) Maintain and operate the Acquired Companies and
the properties and assets of the Acquired
Companies in compliance in all material respects
with all applicable Laws, including, without
limitation and subject to the rights set forth in
Section 4.12 hereunder, all applicable
Environmental Laws;
(D) Manage and administer all pending and threatened
litigation matters in a manner consistent with
commercially reasonable business practice, giving
due regard to recommendations of legal counsel;
(E) Maintain all liquor (or beer and wine, as
applicable) licenses, permits and authorizations
required by Law for the continued sale of alcohol
by the Acquired Companies at those Properties at
which alcohol is presently served;
(F) Maintain all current insurance or reinsurance
policies the absence of which would have a
Material Adverse Effect, unless simultaneously
with any cancellation, termination, or lapse,
replacement policies providing coverage equal to
or greater than the coverage so canceled,
terminated, or lapsed are in full force and
effect and written copies thereof have been
provided to Buyer; and
(G) Continue all capital projects, including without
limitation, the construction and development of
the Blackstone Golf Club in Frisco, Texas and the
Whitestone Golf Club in Benbrook, Texas as set
forth in the capital expenditure budget attached
as Schedule 4.1(c).
(b) The Sellers and the Buyer agree that all intercompany
accounts (if any) between the Sellers or any affiliate of the Sellers (other
than an Acquired Company) on the one
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hand and any of the Acquired Companies on the other hand shall be settled by the
Sellers and the Acquired Companies, at or prior to the Closing.
(c) In furtherance and not in limitation of the foregoing, the
Sellers covenant and agree that, except as described in Schedule 4.1(c), the
Acquired Companies will not, prior to the Closing, without the consent of the
Buyer, which consent shall not be unreasonably withheld (except as set forth in
subsections (iv) and (vii) below):
(i) Make any purchase, sale or disposition of any asset or
property with a purchase price in excess of $75,000 individually or $100,000 in
the aggregate, except as provided in the Acquired Companies existing capital
budget, or mortgage, pledge, subject to a voluntary lien or otherwise
voluntarily encumber (except for mechanics', carriers', suppliers' workmen's or
repairmen's liens) any of its properties or assets, except for any such
mortgage, pledge, lien or encumbrance which, by its terms, will be terminated or
otherwise be extinguished at or prior to the Closing;
(ii) Incur any material contingent liability as a guarantor
or otherwise with respect to the obligations of others, or incur any other
material contingent or fixed obligations or liabilities in excess of $75,000
individually or $100,000 in the aggregate;
(iii) Make any change or incur any obligation to make a
change in its articles or certificate of incorporation, by-laws or authorized or
issued capital stock, except for the release of any pledge of the Acquired
Shares made by or on behalf of the Sellers to REITCO's senior lenders;
(iv) Declare, set aside or pay any dividend, make any other
distribution in respect of its capital stock or make any direct or indirect
redemption, purchase or other acquisition of its capital stock, except for any
transfer of the Acquired Shares by and between the Sellers and/or their
respective Subsidiaries on or prior to the Closing Date and provided, however,
that, from and after March 31, 1999 (provided that Sellers shall have extended
the Closing Date in accordance with Section 1.4 hereof) in no event shall the
Acquired Companies pay any dividend, make any distribution in respect of its
capital stock, issue any capital stock or make any direct or indirect
redemption, purchase or other acquisition of its capital stock, make payments to
any Affiliates (other than any other Acquired Company and its Subsidiaries)
except only for payments permitted under Sections 4.1(b) and 4.1(c)(vi) hereof
except (x) for any transfer of the Acquired Shares by and between the Sellers
and/or their respective Subsidiaries on or prior to the Closing Date, as
extended, and (y) the Acquired Companies shall be entitled to distribute or
otherwise pay to the Sellers amounts contributed, loaned or otherwise paid by
Sellers after March 31, 1999 in connection with capital projects;
(v) Make any change in the compensation payable or to become
payable (A) to any of the officers, employees, agents or independent contractors
who receive total annual compensation of $50,000 or less other than in the
ordinary course of business
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consistent with past practice; or (B) to any of its officers, employees, agents
or independent contractors who receive total annual compensation in excess of
$50,000;
(vi) Prepay any loans (if any) from its shareholders,
officers or directors, other than as required by their respective terms and as
required by Section 4.1(b) hereof, or make any change in its borrowing
arrangements;
(vii) Amend, modify or terminate any contract or agreement
disclosed pursuant to Section 2.12(a) hereof or execute or otherwise enter into
or amend or modify any contract or agreement with the Sellers or their
Affiliates (except for the Acquired Companies) except as otherwise contemplated
by this Agreement;
(viii) Change any material accounting principles, policies or
practices used by its relating to the Acquired Companies, except for (A) the
write-off (if any) of goodwill, and (B) any change required by reason of a
concurrent change in generally accepted accounting principals and notice of
which is given in writing by Sellers to Buyer;
(ix) Amend the membership by-laws for any club (each a
"Club", and collectively, the "Clubs") owned or operated by any of the Acquired
Companies;
(x) Sell, assign or create any life or equivalent membership
in any Club;
(xi) (a) sell or create individual memberships at discounts
in excess of 10% off stated initiation fees or deposits; (b) sell or create
individual memberships with dues discounted by more than 10% off stated dues or
the price of goods or services (provided, Sellers may offer up to two (2) months
free dues or equivalent dollar club credit as a sale closing incentive); (c)
sell multiple membership units (up to five (5) units) at discounts in excess of
33% off stated initiation fees or deposits (plus an additional 10% discount for
all cash purchases); or (d) sell more than six (6) memberships to any one (1)
party;
(xii) initiate any marketing practices or programs that are
not consistent with each club's prior practices; or materially change the
membership commission structures at any club;
(xiii) Create or issue any honorary membership at any Club;
(xiv) Collect any monthly or quarterly dues (in excess of de
minimis amounts) more than 1 collection period in advance;
(xv) Merge or consolidate with or agree to merge or
consolidate with, nor purchase or agree to purchase all or substantially all of
the assets of, or otherwise acquire, any other party (subject to the terms of
Section 4.8 hereof);
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(xvi) Authorize for issuance, issue, sell or deliver any
additional stock of any class of any Acquired Company or any securities or
obligations convertible into stock of any class of any Acquired Company or issue
or grant any option, warrant or other right to purchase any stock of any class
of any Acquired Company;
(xvii) Except for the transfer of capital stock of MGG II
from OPCO to REITCO, assign, transfer, convey, pledge or transfer any shares of
any Acquired Company's capital stock;
(xviii) Modify, amend or alter any existing credit
facilities, the obligations with respect to which will remain with the Acquired
Company after the Closing Date;
(xix) Cause a default by an Acquired Company under any
existing material agreement or contract of such Acquired Company, which default,
if not willful, could have a Material Adverse Effect;
(xx) Execute or otherwise enter into any construction or
development agreement requiring a payment in excess of $100,000 except as
otherwise provided in the Acquired Companies' capital budget attached as
Schedule 4.1(c) hereto;
(xxi) Cause or suffer any act or omission from and after the
date of this Agreement which would cause or result in the breach of the
representations and warranties contained in Section 2.14, which breach would
have a Material Adverse Effect; provided, however, that the disclosure of items
by the Buyer pursuant to Section 4.12 hereof shall not be deemed to be an act or
omission resulting in a breach of the representations and warranties contained
in Section 2.14;
(xxii) Take any affirmative action, or affirmatively fail to
take any action, necessary to maintain all permits, licenses and authorizations
(except as they relate to alcohol) required by Law for the operation of the
Acquired Companies and the Properties the absence of which would have a Material
Adverse Effect; and
(xxiii) Agree or make any commitment to take any of the
actions prohibited by this Section 4.1.
Section 4.2 Investigation. The Buyer acknowledges and agrees that it
(a) has made its own inquiry and investigation into, and, based thereon, has
formed an independent judgment concerning, the Acquired Companies, and (b) will
not assert any claim against the Sellers or the Acquired Companies or any of
their respective directors, officers, employees, agents, shareholders,
Affiliates, consultants, investment bankers, advisors or representatives, or
hold the Sellers or any such Persons liable, for any inaccuracies, misstatements
or omissions with respect to such information furnished by the Sellers or such
Persons concerning the
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Acquired Companies, other than any inaccuracies or misstatements in the
representations and warranties contained in this Agreement or as otherwise
expressly provided herein (subject to the limitations set forth in Section 2.18)
or in the case of fraud. Sellers acknowledge and agree that Buyer will make its
own investigations and inquiries with respect to the Acquired Companies and
Properties; provided that information obtained through such investigations that
is not included in the Review Room will not limit, qualify or in any manner
affect Sellers' representations or warranties contained in this Agreement or
limit Buyer's rights to assert claims based upon such representations or
warranties.
Section 4.3 Access to Information.
(a) From the date hereof until the Closing Date, upon reasonable
notice, the Sellers shall, and shall cause each Acquired Company and each of
their respective officers, directors, employees, representatives, attorneys,
auditors and authorized agents to, (i) afford the officers, directors,
employees, authorized agents, auditors, attorneys and representatives of the
Buyer reasonable access, during normal business hours, to the offices,
properties, other facilities, books and records of the Acquired Companies and to
those officers, directors, employees, representatives, counsel, auditors and
agents of the Acquired Companies who have material knowledge pertaining to the
Properties or the Acquired Companies including, without limitation, access to
enter upon and investigate the Properties or the Acquired Companies, and (ii)
furnish to the officers, directors, employees and authorized agents, auditors,
attorneys and representatives of the Buyer such additional financial and
operating data and other information regarding the Acquired Companies as the
Buyer may from time to time reasonably request; provided, however, that (A) such
investigation shall not unreasonably interfere with any of the businesses or
operations of the Acquired Companies, (B) the Buyer shall not, prior to the
Closing Date, have any contact whatsoever with respect to the Acquired Companies
or with respect to the transactions contemplated by this Agreement with any
partner, lender, ground lessor, vendor or supplier of the Acquired Companies,
except in consultation with the Sellers and then only with the express prior
approval of the Sellers, which approval shall not be unreasonably withheld or
delayed, and (C) all requests by the Buyer for access or information pursuant to
this Section 4.3(a) shall be submitted or directed exclusively to an individual
or individuals to be designated by the Sellers. The Buyer shall not be permitted
to conduct any invasive tests on any Property without the Sellers' and the
applicable Acquired Company's prior written consent, which consent shall not be
unreasonably withheld or delayed. The Buyer agrees to indemnify the Sellers from
and against any and all Losses (as hereinafter defined) suffered by the Sellers
as a result of any actions taken by the Buyer with respect to the investigations
and inspections contemplated hereby (excluding any Losses associated with any
pre-existing Environmental Conditions discovered or identified as a result of
the exercise of Buyer's rights under Section 4.12 below).
(b) During the preparation, review and dispute resolution time
periods contemplated by Section 1.3, upon reasonable notice, the Buyer shall,
and shall cause each Acquired Company (or any successor thereto) and each of
their respective officers, directors,
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employees, representatives, attorneys, auditors and authorized agents to, (i)
afford the officers, directors, employees, auditors, attorneys, authorized
agents and representatives of the Sellers reasonable access, during normal
business hours, to the offices, properties, books and records of the Acquired
Companies (or any successor or successors thereto), (ii) furnish to the
officers, directors, employees, auditors, attorneys, authorized agents and
representatives of the Sellers such additional financial and operating data and
other information regarding the Acquired Companies (or any successor or
successors thereto) as the Sellers may from time to time reasonably request to
perform its obligations, or avail itself of its rights, contained, in each case,
in Section 1.3 hereof; provided, however, that such investigation shall not
unreasonably interfere with any of the businesses or operations of the Acquired
Companies (or any successor or successors thereto).
(c) In order to facilitate the resolution of any claims made by
or against or incurred by the Buyer of the Acquired Companies after the Closing
or for any other reasonable purpose, for a period of seven (7) years following
the Closing, the Sellers shall (i) retain the books and records of the Sellers
which relate to the Acquired Companies and their operations for periods prior to
the Closing and which shall not otherwise have been delivered to the Buyer or
the Acquired Companies and (ii) upon reasonable notice, afford the officers,
directors, employees, authorized agents, auditors, attorneys and representatives
of the Buyer and Acquired Companies reasonable access (including the right to
make photocopies, at the expense of the Buyer or the Acquired Companies), during
normal business hours, following reasonable notice thereof, to such books and
records.
(d) In order to facilitate the resolution of any claims made by
or against or incurred by the Sellers after the Closing in respect of their
ownership of the Acquired Companies or for any other reasonable purpose, for a
period of seven (7) years following the Closing, the Buyer shall, and shall
cause the Acquired Companies to, (i) retain the books and records of the Buyer
or the Acquired Companies, as the case may be, and their operations for periods
prior to the Closing and which shall not otherwise have been retained by the
Sellers and (ii) upon reasonable notice, afford the officers, directors,
employees, authorized agents, auditors, attorneys and representatives of the
Sellers reasonable access (including the right to make photocopies, at the
expense of the Sellers), during normal business hours, following reasonable
notice thereof, to such books and records.
Section 4.4 Confidentiality. Subject to the requirements of
applicable Law until the Closing, the parties will, and will instruct each of
their respective Affiliates, associates, partners, employees, directors,
officers, agents, attorneys, auditors, investment bankers, representatives and
advisors (the "Representatives") to, hold in confidence all such information as
is confidential or proprietary, will use such information only in connection
with the consummation of the transactions contemplated by this Agreement and, if
this Agreement is terminated in accordance with its terms, will deliver promptly
to the others (or destroy and certify to the other the destruction of) all
copies of such information (and any copies, compilations or extracts thereof or
based thereon) then in their possession or under their
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control. Each party hereto agrees that money damages would not be a sufficient
remedy for any breach of this Section 4.4 by the other party hereto or any of
its Representatives, and that, in addition to all other remedies, such
non-breaching party shall be entitled to specific performance and injunctive or
other equitable relief as a remedy for any such breach, and each such party
further agrees to waive and to use its best efforts to cause its Representatives
to waive, any requirement for the securing or posting of any bond in connection
with any such remedy. Each party agrees to be responsible for any breach of this
Section 4.4 by any of its Representatives. Nothing contained in this Section 4.4
shall effect, modify or otherwise limit the respective agreements and other
obligations of Club Corporation of America (now known as ClubCorp USA, Inc.), on
the one hand, and Sellers, on the other, contained in that certain
Confidentiality Agreement dated as of November 15, 1998, (the "Confidentiality
Agreement"), which Confidentiality Agreement shall remain in full force and
effect.
Section 4.5 Regulatory and Other Authorizations; Consents.
(a) The Sellers shall use their good faith commercially
reasonable efforts to obtain (or cause the Acquired Companies to obtain) the
authorizations, consents, orders and approvals that are or become necessary for
their execution and delivery of, and the performance of their obligations
pursuant to, this Agreement, including, without limitation, the consent of (i)
Governmental Authorities, (ii) landlords under the ground leases, and (iii)
lenders, and the Buyer shall cooperate fully with the Sellers in promptly
seeking to obtain all such authorizations, consents, orders and approvals. If
required by the HSR Act, each party hereto agrees to make an appropriate filing
of a Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated by this Agreement (the "Notification Form") within ten
(10) business days after the date hereof and to supply promptly any additional
information and documentary material that may be requested pursuant to the HSR
Act. The parties hereto will not take any action that will have the effect of
delaying, impairing or impeding the receipt of any required approvals.
(b) The Sellers shall give promptly, or shall cause the Acquired
Companies to give promptly, such notices to third parties and use its or their
commercially reasonable efforts (without, however, any obligation to incur any
costs, liability or other obligation, in excess of de minimis amounts, except
that the Sellers shall pay any consent or other transfer fee or similar payment
required to be paid to the lessor in connection with the granting of a Required
Consent (as defined in Section 7.3(b) hereof)) under any ground lease identified
on Schedule 4.13, to obtain such third party consents as the Buyer may in its
sole and absolute discretion deem necessary or desirable in connection with the
transactions contemplated by this Agreement; provided, however, that the forms
of such notice and/or consent shall be reasonably acceptable to Sellers and
Buyer; and provided, further, however, that any failure to obtain such third
party consents shall not constitute a breach of this Agreement or a failure of
any condition to Closing nor shall it give rise to any right of termination on
the part of the Buyer or impose any independent obligation or liability on the
Sellers except as otherwise set forth in this Agreement.
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(c) The Buyer shall use its good faith commercially reasonable
efforts to assist the Sellers in obtaining the consents of third parties listed
in Schedule 2.6(b), including (i) providing to such third parties such financial
statements and other financial information as such third parties may reasonably
request, (ii) agreeing to commercially reasonable adjustments to the terms of
the agreements with such third parties (provided that neither party hereto shall
be required to agree to any increase in the amount payable with respect thereto
so long as there shall be no increase in Buyer's obligations or decrease in its
rights other than to a de minimis extent) and (iii) executing agreements to
effect the assumption of such agreements on or before the Closing Date effective
from and after the Closing Date.
(d) The Buyer assumes as of the Closing Date, and will continue
to honor in accordance with the respective provision, any and all obligations of
the Sellers arising from and after such date relating to and arising from
Section 6.9(a) (to the extent the Buyer is acquiring any entity covered thereby
or a successor thereto) of that certain Agreement and Plan of Merger dated as of
January 11, 1998 among REITCO, OPCO and Cobblestone Holdings, Inc., as amended.
The Buyer agrees to indemnify the Sellers for any and all Losses incurred by the
Sellers arising out of the breach of any such obligations.
Section 4.6 Further Action. Each of the parties hereto shall use its
respective best efforts to take or cause to be taken all appropriate action, do
or cause to be done all things necessary, proper or advisable, and execute and
deliver such documents and other papers, as may be required to carry out the
provisions of this Agreement and consummate and make effective the transactions
contemplated by this Agreement.
Section 4.7 Press Releases. The parties hereto will, and will cause
each of their Affiliates to, maintain this Agreement confidential and will not,
and will cause each of their Affiliates not to, issue or cause the publication
of any press release or other public announcement with respect to this Agreement
or the transactions contemplated hereby without the prior written consent of the
other party hereto which consent shall not be unreasonably withheld; provided,
however, that nothing herein will prohibit the Sellers or the Buyer from issuing
or causing publication of any such press release or public announcement to the
extent that such party reasonably determines, after consultation with outside
legal counsel, such action to be required by Law or the rules of any applicable
self-regulatory organization, in which event such party will use its
commercially reasonable efforts to allow the other party reasonable time to
comment on such release or announcement in advance of its issuance. The parties
acknowledge that a press release in the form of Schedule 4.7 shall be made
immediately following the execution of this Agreement.
Section 4.8 No Solicitation.
(a) Except as otherwise provided herein, unless and until this
Agreement shall have been terminated in accordance with its terms, the Sellers
agree and covenant that (i) neither Seller nor any of their respective
subsidiaries shall, and each of them shall direct
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and use their best efforts to cause their respective officers, directors,
employees, agents and representatives (including, without limitation, any
investment banker, attorney or accountant retained by it or any of its
subsidiaries) not to, directly or indirectly, initiate, solicit or encourage any
inquiries or the making or implementation of any proposal or offer with respect
to a merger, acquisition, or similar transaction involving the purchase of the
Acquired Companies or the Acquired Shares (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal") or engage in any
negotiations with, or provide any confidential information or data to, or have
any discussions with, any person relating to, an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal.
(b) Notwithstanding anything set forth in this Agreement to the
contrary, the Boards of Directors of the Sellers may furnish information to or
enter into discussions or negotiations with any person that makes an unsolicited
bona fide proposal to purchase the Acquired Companies, whether by merger,
purchase of capital stock or all or substantially all of their assets or
otherwise (a "Proposal"), if the Boards of Directors of the Sellers determine in
good faith that the Proposal, if consummated as proposed, would result in a
transaction more favorable to the Sellers' stockholders from a financial point
of view than the transactions contemplated by this Agreement (any such Proposal
being referred to herein as a "Superior Proposal").
Section 4.9 Tax Cooperation; Structuring Matters.
(a) After the Closing, Sellers shall, and shall cause their
Affiliates to, cooperate fully with Buyer in the preparation of all Tax Returns
(other than Tax Returns with respect to the period of ownership of an Acquired
Company by REITCO as a qualified REIT subsidiary, which shall be prepared and
filed or caused to be filed in a manner consistent with past practice and in the
ordinary course of business (subject to any departure required to comply with
any applicable law) relating to periods ending on or prior to the Closing Date
and shall provide to Buyer, or cause to be provided, at Sellers' sole cost and
expense, any records and other information reasonably requested by such parties
in connection therewith as well as access to, and the cooperation of, the
auditors of Sellers and their Affiliates. After the Closing, Sellers shall, and
shall cause their Affiliates to, cooperate fully with Buyer in connection with
any tax investigation, audit or other proceeding relating to the Acquired
Companies. After the Closing, Buyer shall, and shall cause its Affiliates to,
cooperate fully with Sellers in the preparation of all tax returns required to
be filed by Sellers relating to the golf business and to periods ending on or
prior to the Closing Date and shall provide to Sellers, or cause to be provided
at Buyer's sole cost and expense, any records and other information requested by
such parties in connection therewith as well as access to, and the cooperation
of, Buyer's auditors. Any information obtained pursuant to this Section 4.9 or
pursuant to any other Section hereof providing for the sharing of information or
the review of any tax return or other Schedule relating to taxes shall be
subject to Section 4.4 hereof.
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(b) If and to the extent so requested by the Sellers, and subject
to the Buyer's reasonable judgment that all other conditions precedent of the
Sellers to the Closing have been, or will be, satisfied or waived, the Sellers
may revise the method of effecting Buyer's acquisition of MGG, MGG II and/or
Cobblestone, including without limitation an acquisition of all of the assets of
such entity or entities; provided, however, that (i) any breach of this
Agreement by Buyer and any inability of the Buyer to satisfy any condition to
the Closing arising, in each case, solely as a result of such revised method of
effecting such acquisition shall not be deemed a breach or a failure of such
condition to the Closing, and (ii) the Buyer receives substantially the same
economic benefit as a result of such revised transaction as it would have
received as a result of acquiring the Acquired Shares. Notwithstanding the
foregoing, the Sellers shall have the right, in their sole discretion, to
convert MGG, MGG II and/or Cobblestone into a limited liability company which is
treated as a "disregarded" entity for Federal income tax purposes, or to
transfer the "Cobblestone" trade name and any similar intangibles held by MGG to
a corporation all of the capital stock of which would be owned by MGG and/or
Cobblestone. The parties hereto agree that they will execute, and will cause
their respective direct and indirect subsidiaries to execute, such agreements
and documents and such amendments to this Agreement and any related documents as
shall be appropriate in order to reflect such revised structure.
Section 4.10 Repair of Damage; Condemnation.
(a) In the event that prior to the Closing there is any damage to
the Properties, or any part thereof, which has not been restored prior to
Closing to substantially similar condition as immediately prior to the date such
damage occurred, Buyer shall accept such Properties in their then-current
condition, and Sellers shall remit to the Buyer the net amount of insurance
proceeds actually received by Sellers with respect to such damage, and Buyer and
Sellers shall proceed with the Closing.
(b) In the event that prior to the Closing, any portion of the
Properties is subject to a taking, Buyer shall accept the Properties in their
then-current condition and proceed with the Closing, in which case Sellers shall
remit the net amount of any award actually received by Sellers in connection
with such taking. In the event of any such taking that will have a Material
Adverse Effect, Sellers shall not compromise, settle, or adjust any claims to
such award without Buyer's prior written consent, which consent shall not be
unreasonably withheld or delayed.
(c) Sellers agree to give Buyer prompt notice of any taking of,
or damage to, any material part of the Properties.
Section 4.11 Liquor Licenses.
(a) The parties hereto agree to use commercially reasonable
efforts to preserve or to otherwise obtain those authorizations, consents or
approvals necessary to assure
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that each Property currently operating with a liquor (beer) license, or that is
in the process of applying for such license, either retains such liquor (beer)
license immediately prior to the Closing or receives a new liquor (beer) license
no later than the Closing Date provided, however, that in the event the Sellers
use their commercially reasonable efforts as provided herein, neither Sellers
nor any of their Affiliates or subsidiaries shall have any liability or
obligation to Buyer or any person claiming through Buyer in the event that any
or all such liquor (beer) licenses, authorizations, consents or approvals are
not retained or received, as applicable.
(b) The Sellers and the Buyer agree that, in the event any
consent, approval or authorization necessary or desirable to preserve or
otherwise obtain a liquor (beer) license for any Property is not obtained prior
to the Closing, the Sellers will, subsequent to the Closing, cooperate with the
Buyer and the Acquired Companies (at Buyer's sole cost and expense) in
attempting to obtain such consent, approval or authorization as promptly
thereafter as practicable. Until such consent, approval or authorization can be
obtained, but (I) with respect to those liquor (beer) licenses which have been
issued and are in place immediately prior to Closing only and (II) for a period
not to exceed six (6) months after Closing, the Sellers, will enter into such
customary arrangements (including, without limitation, reasonable compensation
to the Sellers (but without a profit component), the assumption of all loss,
cost, obligation and liability of any kind or nature, the full indemnification
of Sellers in connection therewith and the maintenance of all applicable
insurance by Buyer) as the Buyer may reasonably request and the Sellers' shall
reasonably agree to, subject in all events to applicable Law and at Buyer's sole
cost and expense, to provide the Buyer or the Acquired Companies with the rights
and benefits of the existing liquor (beer) license for such period.
Notwithstanding the forgoing, Buyer and Sellers acknowledge and agree that (i)
certain of the liquor (beer) licenses may not be under the direct control of the
Sellers, and as a result, provided that Sellers undertake, in a commercially
reasonable manner, to require that the holder(s) of the liquor (beer) license
enters into the arrangement contemplated in the preceding sentence, Sellers'
obligations set forth therein shall be deemed satisfied, (ii) certain
governmental and quasi-governmental agencies and authorities (including without
limitation, applicable alcohol beverage commissions and comparable entities) may
prohibit or materially restrict the use by Buyer of the rights and benefits of
the existing liquor (beer) licenses, in which event (provided that Sellers
cooperate in good faith with the Buyer in order to structure a customary
arrangement which will provide the Buyer with the rights and benefits of the
existing liquor (beer) licenses) Sellers' obligations under the preceding
sentence shall be waived as to each applicable liquor (beer) license (it being
further acknowledged that the customary arrangements contemplated above may
differ in various jurisdictions), (iii) REITCO is a publicly traded company and
has a material and on-going interest in maintaining strict controls over the
public's perception of REITCO and its affiliates, which interest shall be a
material concern to both Buyer and Sellers in establishing any contemplated
customary arrangements.
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(c) It is the intention of the Buyer pursuant to this Section
4.11 (which intention is acknowledged by the Sellers in agreeing to (i) use
their commercially reasonable efforts to preserve or obtain the necessary
licenses and consents as provided in (a) above, and (ii) make available, on
customary terms reasonably acceptable to Sellers, the rights and benefits of
Sellers' existing liquor licenses as provided in (b) above), that to the maximum
extent reasonable and provided that the terms of this Section 4.11 are
satisfied, there shall be little or no interruption in the sale of alcohol at
any Property.
Section 4.12 Environmental Assessments. Prior to the Closing Date,
Buyer and Buyer's environmental consultant, which consultant shall be reasonably
satisfactory to Sellers (it being agreed that ATC is reasonably satisfactory),
shall be permitted reasonable access to the Properties (or any one or more of
them), for the sole purpose of conducting Phase I environmental site assessments
of such Properties which conform to the ASTM Standard Practice for Environmental
Site Assessments: Phase I Process E 1527-97, modified to include a limited
asbestos survey. Such access shall be under reasonable terms and conditions so
as not to materially interfere with the operations of the Sellers. In the event
that Buyer's environmental consultant, upon the conclusion of the Phase I site
assessment, reasonably recommends any Phase II assessment or subsurface
investigation of the Properties, including but not limited to soil, sediment or
groundwater testing or sampling, borings, installation or sampling of monitoring
xxxxx (generally, "Phase II Investigations"), permission for access to perform
such Phase II Investigations must be obtained in writing from the Sellers in
advance of any such activity, such permission not to be unreasonably withheld or
delayed (and to be granted provided that such Phase II Investigations are of a
usual and customary nature in consideration of the issue which is the subject
matter of such Phase II Investigation). If Buyer conducts any Phase II
Investigations on the Properties, Buyer agrees to indemnify and hold Sellers
harmless from any and all damages, losses, liabilities, expenses, costs, claims,
actions, suits, proceedings, assessments, orders, judgments, fines and penalties
(including without limitation, reasonable legal, accounting, consulting,
engineering and other expenses), which may be incurred, arise out of or result
from any acts and omissions of Buyer, its employees, agents and representatives
taken in connection with such Phase II Investigations. This provision, and any
rights with respect to pre-closing environmental investigations, testing and/or
site assessments, applies only to the Properties. Any and all testing,
investigations and/or site assessments shall be at the sole cost and expense of
the Buyer.
Section 4.13 Property Holdback Rights. On or prior to the date which
is fifteen (15) days prior to the Closing Date (as the same may have been
extended by Sellers in accordance with Section 1.4 above, the "Holdback
Designation Date"), Sellers shall have the right to deliver to the Buyer a
property holdback designation letter for any Property (a "Holdback Property")
for which a Required Consent under a ground lease or other agreement identified
on Schedule 4.13 has not been obtained by such date (a "Holdback Letter") in
accordance with the terms, conditions and limitations set forth in this Section
4.13. Sellers' failure to deliver to the Buyer, on or prior to the Holdback
Designation Date, an executed Holdback Letter shall be conclusively deemed as
Sellers' confirmation of the absence of any Holdback Properties.
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Sellers specifically waive any right to deliver a Holdback Letter after the
Holdback Designation Date unless the Sellers incur all costs incurred in
connection with the exercise of the rights hereunder, including any incremental
costs resulting from such failure to timely deliver a Holdback Letter.
Notwithstanding the delivery of a Holdback Letter by the Sellers with respect to
any one or more Holdback Properties, the Buyer shall have the right, by written
notice delivered to the Sellers on or before the date which is ten (10) days
prior to the Closing Date (or such later date if accepted by the Sellers), to
waive the Required Consent requirement with respect to any or all such Holdback
Properties and to thereafter proceed to Closing with respect to such Holdback
Properties as if such Required Consent had been obtained.
Notwithstanding anything to the contrary contained in this Agreement,
and for the purposes of this Section 4.13 only, the Buyer and the Sellers
irrevocably agree that the allocated purchase price (individually and
collectively, the "Allocated Value") with respect to each Property that could
become a Holdback Property (i.e., the Properties identified on Schedule 4.13),
in the event such Property becomes a Holdback Property hereunder, is as set
forth on Schedule 4.13, it being further acknowledged that such allocation does
not have any bearing or relationship to, and has been derived independently
from, the allocation of the Purchase Price set forth elsewhere in this
Agreement.
With respect to each Holdback Property, the Closing Date with respect
to such Holdback Property shall be deferred to the earlier of (x) the day which
is six (6) months after the Closing Date, or (y) the day that is fifteen (15)
days following receipt of the applicable Required Consent (the "Holdback
Property Closing Date").
With respect to each Holdback Property, Buyer and Sellers,
respectively, shall remain fully obligated to purchase and sell (i) such
Holdback Properties (or the Acquired Shares of the entity which owns such
Holdback Property) and (ii) all other Acquired Shares (and the Properties
related thereto) on the terms and conditions set forth in this Agreement,
provided that (i) the aggregate Purchase Price payable on the Closing Date,
pursuant to Section 1.3(a) above applicable to all other Acquired Shares (and
the Properties related thereto) shall be (x) reduced by the Allocated Value of
the Holdback Property or Holdback Properties. Any costs incurred with respect to
the holdback of a Holdback Property (which may include a real property transfer)
shall be for the account of the Sellers.
With respect to the Holdback Properties, (i) an amount equal to four
percent (4%) of the Allocated Value of each Holdback Property shall be retained
by the Escrow Agent as a continuing deposit subject to disposition, as
liquidated damages, in accordance with Article IX as to such Holdback Property;
and (ii) the Closing Date with respect to the Holdback Properties shall be the
Holdback Property Closing Date. It is the intention of the parties hereunder
that: the Holdback Property Closing Date shall be deemed to be the Closing Date
with respect to the Holdback Properties under this Agreement; that on the
Holdback Property Closing Date the Holdback Properties (or the Acquired Shares
related thereto) shall be
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conveyed to the Buyer in exchange for the Allocated Value for each Holdback
Property, and that; with respect to the Holdback Properties, the date of March
31, 1999 as set forth in Section 9.1(b) shall be deemed to be September 30,
1999, time being of the essence with respect to such dates.
The Sellers and the Buyer agree that, with respect to each Holdback
Property, the applicable Acquired Company and the Buyer shall, with respect to
the period ending on the Holdback Property Closing Date with respect to each
applicable Holdback Property, enter into such management or other arrangements,
each in form and substance reasonably acceptable to the Buyers and Sellers, but
only if such arrangements can be entered into and performed without violating
the provisions of any law or any agreement or other contracts relating to the
applicable Holdback Property so as to provide Buyer, to the maximum extent
reasonably possible, with the net economic benefits as if such Holdback Property
had been acquired by Buyer on the initial Closing Date.
Section 4.14 Observation Rights; Certain Communications.
(a) Commencing on the date which is one (1) Business Day after
the date of this Agreement, Buyer's representatives shall have the right, from
time to time, to visit and observe all of the Properties and Cobblestone
corporate and regional headquarters during normal business hours, provided,
however, that such visits and observations shall not unreasonably interfere with
the normal business operations of the Acquired Companies. Such visitation and
observation rights shall include the right to attend all meetings relating to
the operations, management, financial and accounting matters of the Acquired
Companies, including, but not limited to, all meetings attended by persons
identified in Section 2.18(c) excluding meetings relating to the conveyance of
the Acquired Companies to Buyer. Sellers shall use their good faith and
commercially reasonable efforts to provide timely notice to Buyer's
representatives of each of such meetings and to accommodate Buyer's
representatives' reasonable requests for access to office space, services and
equipment. Buyer's rights hereunder shall be subject, in all events, to the
Confidentiality Agreement (as defined in Section 4.4).
(b) The Buyer and Sellers agree that, in the event Buyer
identifies issues with respect to the operation or management of the Acquired
Companies in connection with the exercise of its rights under Section 4.14(a)
hereof that Buyer believes in good faith and in its commercially reasonable
business judgment to be detrimental to, or to have an adverse impact on, the
Acquired Companies or their respective operations, representatives of the Buyer
may engage in discussions about such issues with the Sellers' Designees. The
Buyer and the Sellers, through the Sellers' Designees, agree to communicate and
to work together in good faith with respect to such issues in order to correct
such issues, if appropriate, or to develop a plan or process to address any such
issues in order to preserve the Acquired Companies operations and reputation
[goodwill]. For purposes, hereof, the term "Sellers' Designees"
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shall initially mean Xxxxxxx X. Xxxxxxxx and Xxxxx X. Xxxxxx or such other
officer or key employee of a Seller as may subsequently be identified to Buyer
in writing.
(c) The Sellers shall endeavor, in good faith, to notify Buyer
promptly after the Sellers obtain Sellers' Knowledge (as defined in Section
2.18(a) hereof) of any breach of any of Sellers' covenants under Section 4.1,
provided, however, that (i) Sellers shall have no obligation to notify Buyer of
any breach of which Buyer has Buyer's Knowledge (as defined in Section 3.8, but
including for such purposes the knowledge of those individuals who may from time
to time perform those actions permitted by Section 4.14(a) and (b) hereof), and
(ii) Sellers agreement hereunder shall not impose any additional liability or
obligation under this Agreement.
ARTICLE V
EMPLOYEE MATTERS
Section 5.1 Employees.
(a) The Buyer shall ensure that all persons who were employed by
the Acquired Companies immediately preceding the Closing Date, including those
on vacation, leave of absence or disability (the "Acquired Companies
Employees"), will remain employed in a comparable position on and immediately
after the Closing Date for such period of time as determined by the Buyer, at
not less than the same base rate of pay, except as otherwise provided in this
Section 5.1. Notwithstanding the foregoing, the Buyer shall not, at any time
prior to 60 days after the Closing Date, effectuate a "plant closing" or "mass
layoff" as those terms are defined in the Worker Adjustment and Retraining
Notification Act of 1988 ("WARN"), or comparable conduct under any applicable
state law, affecting in whole or in part any facility, site of employment,
operating unit or employee of any of the Acquired Companies without complying
fully with the requirements of WARN.
(b) To the extent permissible under applicable law and to the
extent that service is relevant for purposes of eligibility and vesting under
any employee benefit plan, program or arrangement established or maintained by
the Buyer (other than any defined benefit pension plan) following the Closing
Date for the benefit of Acquired Companies Employees at such time as any
employee benefit plan, program or arrangement is made available to Acquired
Companies Employees, such plan, program or arrangement shall credit such
employees for service on or prior to the Closing Date that was recognized by the
Sellers or the Acquired Companies, as the case may be, for purposes of employee
benefit plans, programs or arrangements (including vacation policies) maintained
by any of them. In addition, with respect to any welfare benefit plan (as
defined in Section 3(1) of ERISA) established or maintained by the Buyer
following the Closing Date for the benefit of Acquired Companies Employees, to
the extent permissible under applicable law, such plan shall waive any
pre-existing condition exclusions and provide that any covered expenses incurred
during the 1999 plan year on or before the Closing Date by an Acquired Company
Employee or by a
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covered dependent shall be taken into account for purposes of satisfying
applicable deductible coinsurance and maximum out-of-pocket provisions after the
Closing Date.
(c) Buyer agrees that either Buyer or the Acquired Companies will
make COBRA continuation coverage available to individuals who are COBRA
qualified beneficiaries under the Benefit Plans immediately prior to the Closing
Date.
Section 5.2 Employee Benefits. For a period of one year following the
Closing Date, the Buyer shall provide the Acquired Companies Employees with
benefits that either are (i) substantially comparable, in the aggregate, to the
benefits provided under the Benefit Plans as in effect immediately prior to the
Closing Date or (ii) the same as the benefits generally made available to a
majority of the Buyer's similarly situated employees.
Section 5.3 Other Employee Benefits. From and after the Closing Date,
Buyer will, or will cause the Acquired Companies to, honor in accordance with
their terms all of the severance payments pursuant to Severance Arrangements
between any of the Acquired Companies and the Acquired Companies Employees in
effect as of the date hereof and listed on Schedule 2.12(a). Seller shall honor
and be liable for all payments related to the Retention Bonuses.
Section 5.4 Indemnity. Anything in this Agreement to the contrary
notwithstanding, (i) the Buyer hereby agrees to indemnify the Sellers and their
respective Affiliates against and hold the Sellers and their respective
Affiliates harmless from any and all Losses arising out of or otherwise in
respect of (a) any claim made by any Acquired Company Employee against the
Sellers or any of their Affiliates for any severance or termination benefits
pursuant to the provisions of the Severance Arrangements or any applicable
federal or state law arising after the Closing, (b) any action taken after the
Closing by the Buyer with respect to any plan (including any Benefit Plan), (c)
any claim for payments or benefits by Acquired Companies Employees or their
beneficiaries under any Benefit Plan, and (d) any failure of the Buyer to
discharge their obligations under this Article V, and (ii) the Sellers hereby
jointly and severally agree to indemnify the Buyer and its Affiliates against
and hold the Buyer and its Affiliates harmless from any and all Losses arising
out of or otherwise in respect of any claim made by any Acquired Company
Employee against the Buyer or any of its Affiliates for any Retention Bonuses,
in the case of clauses (i) and (ii), without regard to the Threshold Amount or
the Maximum Amount (as defined in Article VIII hereof); provided, however, that
the procedural requirements of Sections 8.2 and 8.3 shall apply to Sellers' and
the Buyer's indemnification obligations under this Section 5.4.
Section 5.5 No Third Party Beneficiaries. Notwithstanding anything
else contained herein to the contrary, nothing in this Article V shall be
construed to create any third party beneficiary rights in any person who is not
a party to this Agreement.
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ARTICLE VI
TAX MATTERS
Section 6.1 Conveyance Taxes; Costs. The Buyer shall be liable for
and shall hold the Sellers harmless against any real property transfer, sales,
use, transfer, value added, excise, stock transfer, stamp, recording,
registration and any similar Taxes that become payable in connection with the
acquisition by the Buyer contemplated hereby, and the applicable parties shall
file such applications and documents as shall permit any such Tax to be assessed
and paid on or prior to the Closing Date in accordance with any available
pre-sale filing procedure. The Sellers agree to cooperate with the Buyer and,
subject to the other terms of this Agreement, to take any action reasonably
requested by the Buyer, at no cost to the Sellers, in order to minimize the
amount of such Taxes. The parties shall execute and deliver all instruments and
certificates necessary to permit compliance with the foregoing. The Buyer shall
pay the entire cost of any title insurance (for itself or any lender, including
lenders of indebtedness assumed by the Buyer hereunder), surveys, title
inspections, and appraisals that the Buyer elects to obtain in connection with
the transactions contemplated hereby. The Buyer shall pay any and all attorneys'
fees of its lenders and lenders of indebtedness assumed by the Buyer hereunder.
Section 6.2 Treatment of Indemnity Payments. All payments made by the
Sellers or the Buyer, as the case may be, to or for the benefit of the other
party pursuant to any indemnification obligations under this Agreement shall be
treated as adjustments to the consideration for Tax purposes, and such agreed
treatment shall govern for purposes of this Agreement.
Section 6.3 Employee Withholding. The Sellers and the Buyer agree
that, pursuant to and to the extent permitted by the "Alternative Procedure"
provided in Section 5 of Revenue Procedure 84-77, 1984-2 C.B. 753, with respect
to filing and furnishing IRS Forms W-2, W-3 and 941, (a) the Sellers and the
Buyer shall each report on a "predecessor-successor" basis, as set forth
therein, (b) the Sellers shall be relieved from furnishing Forms W-2 for the
1999 calendar year to any of the Sellers' employees that become employees of the
Buyer and (c) the Buyer shall assume the obligations of the Sellers to furnish
such Forms W-2 to such employees for the full 1999 calendar year.
ARTICLE VII
CONDITIONS TO CLOSING
Section 7.1 Conditions to the Obligations of Each Party. The
respective obligations of each party to consummate the transactions contemplated
by this Agreement shall be subject to the satisfaction or waiver, at or prior to
the Closing, of each of the following conditions, any or all of which may be
waived, in whole or in part by the parties hereto (but only to the extent that
such matter is a precondition to the obligations of such waiving party), to the
extent permitted by applicable law:
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(a) HSR Act. Any waiting period (and any extension thereof) under
the HSR Act applicable to the transactions to be consummated at the Closing
shall have expired or been terminated; and
(b) No Order. No Governmental Authority or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, injunction or other order (whether temporary,
preliminary or permanent) that is in effect and has the effect of making the
transactions contemplated by this Agreement for the Closing illegal or otherwise
restraining or prohibiting consummation of such transactions; provided, however,
that the provisions of this Section 7.1(b) shall not apply to a party unless
such party has used its best efforts to have any such order or injunction
vacated.
Section 7.2 Conditions to Obligations of the Sellers. The obligations
of the Sellers to consummate the transactions contemplated by this Agreement
shall be subject to the satisfaction or waiver, at or prior to the Closing, of
each of the following conditions:
(a) Covenants. All covenants contained in this Agreement to be
complied with by the Buyer on or before the Closing shall have been complied
with in all respects except where the failure to so comply would not have a
material adverse effect on the Buyer's ability to perform its obligations under
this Agreement, and the Sellers shall have received a certificate of the Buyer
to such effect signed by a duly authorized officer of the Buyer; and
(b) Consents. The Buyer shall have received the authorizations,
orders, approvals and consents of Governmental Authorities and third parties
described in Schedules 3.3(a) and 3.3(b), in form and substance reasonably
satisfactory to the Sellers, except where the failure to so receive would not
have a material adverse effect on the Buyer's ability to perform its obligations
under this Agreement.
Section 7.3 Conditions to Obligations of the Buyer. The obligations
of the Buyer to consummate the transactions contemplated by this Agreement shall
be subject to the satisfaction or waiver by the Buyer, at or prior to the
Closing, of each of the following conditions:
(a) Covenants. All covenants contained in this Agreement (except
for those contained in Sections 4.1(a)(A) through 4.1(a)(G) and in Section
4.1(c) hereof) to be complied with by the Sellers on or before the Closing shall
have been complied with in all respects, except where the failure to so comply
would not have (A) a Material Adverse Effect or (B) a material adverse effect on
the Sellers' ability to perform their obligations under this Agreement, and the
Buyer shall have received a certificate of the Sellers to such effect signed by
a duly authorized officer thereof;
(b) Consents. The Buyer, Sellers, and the Acquired Companies, as
applicable, shall have received (A) those consents to the transactions
contemplated hereby
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listed on Schedule 7.3(b) hereto (the "Required Consents"), subject in all
circumstances to Section 4.13, and (B) the authorizations, orders, approvals and
consents of Governmental Authorities and third parties described in Schedules
2.6(a) and 2.6(b) in form and substance reasonably satisfactory to the Buyer,
except where the failure to so receive would not have (A) a Material Adverse
Effect or (B) a material adverse effect on the Sellers' ability to perform their
obligations under this Agreement;
(c) FIRPTA Withholding. At or prior to the Closing, the Buyer
shall have received from each Seller a "transferor's certificate of non-foreign
status" as provided in the Treasury Regulations under Section 1445 of the Code
in the form attached hereto as Exhibit D;
(d) Absence of Certain Breaches. There shall not then exist a
breach or multiple breaches of (i) any representation or warranty of the Sellers
which would give rise to aggregate Losses in excess of an amount equal to the
Threshold Amount plus the Maximum Amount (as each is hereinafter defined); or
(ii) any of the covenants of the Sellers contained in Sections 4.1(a)(A) through
4.1(a)(G) or Section 4.1(c) which has given rise to, or will give rise to,
aggregate Losses (including for such purpose only, the impairment of the fair
market value of the Properties and assets of the Acquired Companies) in excess
of $500,000, which breach or multiple breaches, in the case of subclause (i) and
subclause (ii) of this Section 7.3(d), remains uncured as of the Closing (as the
same may be extended pursuant to Section 1.4 hereof); provided, however, that,
in the event the Sellers elect to cure any such breach contemplated hereby, the
Sellers shall fully cure such breach;
(e) Legal Opinion. The Buyer shall have received from counsel to
the Sellers an opinion in form reasonably acceptable to the Buyer, that each of
the Sellers is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has all the requisite
corporate power and authority to enter into this Agreement, to carry out its
obligations hereunder and to consummate the transactions contemplated hereby;
and
(f) Absence of Significant Environmental Liabilities. The
investigations, tests and site assessments permitted to be conducted pursuant to
Section 4.12 hereof shall not have revealed Significant Environmental
Liabilities (as defined in Section 9.1(e) hereof) which continue to exist as of
the Closing.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Survival.
(a) Subject to the limitations and other provisions of this
Agreement, the representations and warranties of the parties hereto contained
herein, as the case may be, shall survive the Closing and shall remain in full
force and effect, for a period of one (1) year after
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the Closing Date; provided, however, that the representations and warranties of
the parties contained in Sections 2.1, 2.2, 2.17, 3.1 and 3.6 shall survive the
Closing in perpetuity and the representations and warranties of the Sellers
contained in Sections 2.8 and 2.9 shall survive until the seven (7) year
anniversary of the Closing Date.
(b) Subject to the limitations and other provisions of this
Agreement, including Section 8.1(a) above, each covenant and agreement of the
parties hereto contained herein shall survive the Closing and shall remain in
full force and effect for: (i) one (1) year or (ii) until the end of the
applicable period specified elsewhere in this Agreement with respect to such
covenant or agreement.
Section 8.2 Indemnification by the Sellers.
(a) The Sellers jointly and severally agree, subject to the other
terms and conditions of this Agreement, to indemnify the Buyer and its
Affiliates, officers, directors, employees, agents, successors and assigns (each
a "Buyer Indemnified Party") against and hold them harmless from all Losses
arising out of (i) the breach of any representation or warranty of the Sellers
contained in this Agreement other than in Sections 2.1 and 2.2 (the
"Organization Reps"), Section 2.8 (the "Tax Reps"), Section 2.9 (the "Benefit
Plan Reps") and Section 2.17 (the "Broker's Fee Reps"), (ii) the breach by the
Sellers of any of the Organization Reps, the Tax Reps, the Benefit Plan Reps or
the Broker's Fee Reps, (iii) any breach of any covenant or agreement of the
Sellers contained herein, (iv) the following litigation and claims (the
"Indemnified Disputes"): Xxxxxxx Xxxxxxxxx, et al. v. Meditrust Acquisition
Company and Meditrust Company, L.L.C., Case No. 98-CVS-02857: Forsgate Golf,
L.L.C. v. Meditrust Golf Group II, Inc., Civil Action Number 98-4327 (JCL) and
the claim by Xxxx Xxxx d/b/a Xxxx Properties against Cobblestone Texas, Inc.,
and (v) any action brought by any shareholder of The Meditrust Companies
("Shareholder Action") claiming a breach of the fiduciary duties of the Boards
of Directors of The Meditrust Companies in connection with the conveyance of the
Acquired Companies by the Sellers to the Buyer under this Agreement. For
purposes of this Agreement, claims for Losses arising out of any Shareholder
Action, the Indemnified Disputes or breach by Sellers of any of the Organization
Reps, Tax Reps, Benefit Plan Reps or Broker's Fee Reps shall be referred to
herein as the "Excluded Claims". Anything in Section 8.1 to the contrary
notwithstanding, no claim may be asserted nor any action commenced against the
Sellers for breach of any representation or warranty contained herein, unless
written notice of such claim or action is received by the Sellers describing in
detail the facts and circumstances with respect to the subject matter of such
claim or action on or prior to the thirtieth (30th) day after the date on which
the representation or warranty on which such claim or action is based ceases to
survive as set forth in Section 8.1 (the "Indemnification Cut-Off Date"), and
such claim or action arose on or prior to the date such representation or
warranty ceased to survive, in which case such representation or warranty, and
the Buyer's right to indemnification hereunder will survive as to such claim
until such claim has been finally resolved in accordance with the terms of this
Article VIII.
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(b) The indemnification obligations of the Sellers pursuant to
Section 8.2(a) (excluding the indemnification obligations of the Sellers for
Excluded Claims; the amount paid with respect to Excluded Claims shall not be
counted in any calculation of the Threshold Amount or the Maximum Amount) shall
not be effective until the aggregate dollar amount of all Losses (including
without limitation Sellers' expenses of defending and/or settling any claim or
dispute giving rise to such indemnification obligation) that would otherwise be
indemnifiable pursuant to Section 8.2(a) exceeds one percent (1%) of the
aggregate Purchase Price (the "Threshold Amount"), and then only to the extent
such aggregate amount exceeds the Threshold Amount. The indemnification
obligations of the Sellers pursuant to Section 8.2(a) (excluding the
indemnification obligations of the Sellers related to Excluded Claims) shall be
effective only until the dollar amount paid in respect of the Losses (including
without limitation Sellers' expenses of defending and/or settling any claim or
dispute giving rise to such indemnification obligation) indemnified against
under Section 8.2(a) (excluding the indemnification obligations of the Sellers
related to Excluded Claims) equals five percent (5%) of the aggregate Purchase
Price (the "Maximum Amount") for all Losses. For purposes of determining the
Threshold Amount and the Maximum Amount hereunder, the Purchase Price shall be
the sum calculated in accordance with Section 1.3(a) hereof, using the amount of
$386,000,000 in place of the amount of $391,278,000.
For purposes of this Section 8.2(b), in computing such individual or
aggregate amounts of claims, the amount of any insurance proceeds and any
indemnity, contribution or other similar payment actually received by the Buyer
Indemnified Parties from any third party with respect thereto shall be deducted
from each such claim.
(c) [Not applicable]
(d) A Buyer Indemnified Party shall give the Sellers written
notice of any claim, assertion, event or proceeding by or in respect of a third
party as to which such Buyer Indemnified Party may request indemnification
hereunder or as to which the Threshold Amount may be applied as soon as is
practicable and in any event within thirty (30) days of the time that such Buyer
Indemnified Party learns of such claim, assertion, event or proceeding;
provided, however, that the failure to so notify the Sellers shall not affect
rights to indemnification hereunder except to the extent that the Sellers are
actually prejudiced by such failure. The Sellers shall have the right to direct,
through counsel of their own choosing, the defense or settlement of any such
claim or proceeding at their own expense. If the Sellers elect to assume the
defense of any such claim or proceeding, the Sellers shall consult with the
Buyer Indemnified Party and the Buyer Indemnified Party may participate in such
defense, but in such case the expenses of the Buyer Indemnified Party shall be
paid by the Buyer Indemnified Party. The Buyer Indemnified Party shall provide
the Sellers with access to its records and personnel relating to any such claim,
assertion, event or proceeding during normal business hours and shall otherwise
cooperate with the Sellers in the defense or settlement thereof, and the Sellers
shall reimburse the Buyer Indemnified Party for all its reasonable out-of-pocket
expenses in connection therewith. If the Sellers elect to direct the defense of
any such claim or
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proceeding, the Buyer Indemnified Party shall not pay, or permit to be paid, any
part of any claim or demand arising from such asserted liability unless the
Sellers consent in writing to such payment or unless the Sellers, subject to the
last sentence of this Section 8.2(d), withdraw from the defense of such asserted
liability or unless a final judgment from which no appeal may be taken by or on
behalf of the Sellers is entered against the Buyer Indemnified Party for such
liability. If the Sellers fail to defend or if, after commencing or undertaking
any such defense, the Sellers fail to prosecute or withdraw from such defense,
the Buyer Indemnified Party shall have the right to undertake the defense or
settlement thereof, at the Sellers' expense. If the Buyer Indemnified Party
assumes the defense of any such claim or proceeding pursuant to this Section
8.2(d) and proposes to settle such claim or proceeding prior to a final judgment
thereon or to forego any appeal with respect thereto, then the Buyer Indemnified
Party shall give the Sellers prompt written notice thereof, and the Sellers
shall have the right to participate in the settlement or assume or reassume the
defense of such claim or proceeding.
(e) The Buyer hereby acknowledges and agrees that from and after
the Closing, its sole and exclusive remedy with respect to any and all claims
relating to this Agreement, including the Acquired Shares, shall be pursuant to
the indemnification provisions set forth in this Article VIII. In furtherance of
the foregoing and except as specified herein, the Buyer hereby waives, to the
fullest extent permitted under applicable Law, any and all rights, claims and
causes of action relating to the subject matter of this Agreement that they may
have against the Sellers arising under or based upon any Law (including, without
limitation, any such rights, claims or causes of action arising under or based
upon common law or otherwise).
(f) Except as set forth in this Agreement, the Sellers are not
making any representation, warranty, covenant or agreement with respect to the
matters contained herein. Anything herein to the contrary notwithstanding, no
breach of any representation, warranty, covenant or agreement contained herein
shall give rise to any right on the part of the Buyer, after the consummation of
the transactions contemplated hereby, to rescind this Agreement or any of the
transactions contemplated hereby.
(g) The Sellers shall have no liability under any provision of
this Agreement for and in no event shall the Threshold Amount be applied to any
consequential damages. The Buyer shall take all reasonable steps to mitigate
Losses for which indemnification may be claimed pursuant to this Agreement upon
and after becoming aware of any event that could reasonably be expected to give
rise to any such Losses.
Section 8.3 Indemnification by the Buyer.
(a) The Buyer agrees, subject to the other terms and conditions
of this Agreement to indemnify the Sellers and its Affiliates, officers,
directors, employees, agents, successors and assigns (each a "Seller Indemnified
Party") against and hold them harmless from all Losses arising out of (i) the
breach of any representation or warranty of the Buyer
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contained herein, and (ii) any breach of any covenant or agreement of the Buyer
contained herein. Anything in Section 8.1 to the contrary notwithstanding, no
claim may be asserted nor may any action be commenced against the Buyer for
breach of any representation or warranty contained herein, unless written notice
of such claim or action is received by the Buyer describing in detail the facts
and circumstances with respect to the subject matter of such claim or action on
or prior to the thirtieth (30th) day after the date on which the representation
or warranty on which such claim or action is based ceases to survive as set
forth in Section 8.1, and such claim or action arose on or prior to the date
such representation or warranty ceased to survive, in which case such
representation or warranty will survive as to such claim until such claim has
been finally resolved.
(b) The indemnification obligations of the Buyer pursuant to
Section 8.3(a) shall not be effective until the aggregate dollar amount of all
Losses (including without limitation the Buyer's expenses of defending and/or
settling any claim or dispute giving rise to such indemnification obligation)
that would otherwise be indemnifiable pursuant to Section 8.3(a) exceeds the
Threshold Amount, and then only to the extent such aggregate amount exceeds the
Threshold Amount. The indemnification obligations of the Buyer pursuant to
Section 8.3(a) shall be effective only until the dollar amount paid in respect
of the Losses (including without limitation the Buyer's expenses of defending
and/or settling any claim or dispute giving rise to such indemnification
obligation) indemnified against under Section 8.3(a) aggregates to equal the
Maximum Amount. For purposes of this Section 8.3(b), in computing such
individual or aggregate amounts of claims, the amount of any insurance proceeds
and any indemnity, contribution or other similar payment actually recovered by
the Seller Indemnified Parties from any third party with respect thereto shall
be deducted from each such claim.
(c) [Not applicable]
(d) A Seller Indemnified Party shall give the Buyer written
notice of any claim, assertion, event or proceeding by or in respect of a third
party as to which such Seller Indemnified Party may request indemnification
hereunder or as to which the Threshold Amount may be applied as soon as is
practicable and in any event within thirty (30) days of the time that such
Seller Indemnified Party learns of such claim, assertion, event or proceeding;
provided, however, that the failure to so notify the Buyer shall not affect
rights to indemnification hereunder except to the extent that the Buyer is
actually prejudiced by such failure. The Buyer shall have the right to direct,
through counsel of its own choosing, the defense or settlement of any such claim
or proceeding at its own expense. If the Buyer elects to assume the defense of
any such claim or proceeding, the Buyer shall consult with the Seller
Indemnified Party, the Seller Indemnified Party may participate in such defense,
but in such case the expenses of the Seller Indemnified Party shall be paid by
the Seller Indemnified Party. The Seller Indemnified Party shall provide the
Buyer with access to its records and personnel relating to any such claim,
assertion, event or proceeding during normal business hours and shall otherwise
cooperate with the Buyer in the defense or settlement thereof, and the Buyer
shall reimburse the Seller Indemnified Party for all the reasonable
out-of-pocket expenses of
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such Seller Indemnified Party in connection therewith. If the Buyer elects to
direct the defense of any such claim or proceeding, the Seller Indemnified Party
shall not pay, or permit to be paid, any part of any claim or demand arising
from such asserted liability, unless the Buyer consents in writing to such
payment or unless the Buyer, subject to the last sentence of this Section
8.3(d), withdraws from the defense of such asserted liability, or unless a final
judgment from which no appeal may be taken by or on behalf of the Buyer is
entered against the Seller Indemnified Party for such liability. If the Buyer
fails to defend or if, after commencing or undertaking any such defense, the
Buyer fails to prosecute or withdraws from such defense, the Seller Indemnified
Party shall have the right to undertake the defense or settlement thereof, at
the Buyer's expense. If the Seller Indemnified Party assumes the defense of any
such claim or proceeding pursuant to this Section 8.3(d) and proposes to settle
such claim or proceeding prior to a final judgment thereon or to forego appeal
with respect thereto, then such Seller Indemnified Party shall give the Buyer
prompt written notice thereof and the Buyer shall have the right to participate
in the settlement or assume or reassume the defense of such claim or proceeding.
(e) The Sellers hereby acknowledge and agree that from and after
the Closing, their sole and exclusive remedy with respect to any and all claims
relating to this Agreement shall be pursuant to the indemnification provisions
set forth in this Article VIII. In furtherance of the foregoing and except as
specified herein, the Sellers hereby waive to the fullest extent permitted under
applicable Law, any and all rights, claims and causes of action relating to the
subject matter of this Agreement that they may have against the Buyer arising
under or based upon any Law (including, without limitation, any such rights,
claims or causes of action arising under or based upon common law or otherwise).
(f) Except as set forth in this Agreement, the Buyer is not
making any representation, warranty, covenant or agreement with respect to the
matters contained herein. Anything herein to the contrary notwithstanding, no
breach of any representation, warranty, covenant or agreement contained herein
shall give rise to any right on the part of the Sellers, after the consummation
of the transactions contemplated by this Agreement, to rescind this Agreement or
any of the transactions contemplated hereby.
(g) The Buyer shall have no liability under any provision of this
Agreement for and in no event shall the Threshold Amount be applied to any
consequential damages. The Sellers shall take all reasonable steps to mitigate
Losses for which indemnification may be claimed pursuant to this Agreement upon
and after becoming aware of any event that could reasonably be expected to give
rise to any such Losses.
(h) No indemnification shall be payable to a Seller Indemnified
Party with respect to claims asserted by such Seller Indemnified Party pursuant
to Section 8.3(a) after the Indemnification Cut-Off Date.
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ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be terminated:
(a) at any time, by the mutual written consent of the Sellers and
the Buyer;
(b) by the Sellers if the Closing shall not have occurred on or
prior to March 31, 1999; provided, however, such date may be extended by the
Sellers for additional time as provided in Section 1.4 hereof; provided further,
however, that the right to terminate this Agreement pursuant to this Section
9.1(b) will not be available to Sellers if, at the time of such termination by
Sellers, their failure to perform any of their obligations under this Agreement
has resulted in the failure of the Closing to occur at the time of such
termination, excluding, however, any such failure of the Sellers to so perform
any of their obligations hereunder that is caused by or is the result of a
Buyer's breach of its obligations hereunder or a failure of the Buyer to satisfy
a condition to the Sellers' performance or obligation under this Agreement, as
set forth in Section 7.2 hereof;
(c) by the Sellers (provided that the Sellers are not then in
breach of any representation, warranty, covenant or other agreement contained
herein which would cause the Sellers to be unable to satisfy the conditions to
the Buyer's performance set forth in Section 7.3 hereof, excluding however, any
Sellers' breach which is caused by or is the result of a Buyer's breach of its
obligations hereunder or a failure of the Buyer to satisfy a condition to
Sellers' performance or obligation under this Agreement, as set forth in Section
7.2 hereof), upon written notice to Buyer, upon a material breach of any
representation, warranty or covenant of the Buyer contained in this Agreement,
provided that such breach is not capable of being cured prior to March 31, 1999
(or, if later, the Closing Date as extended by the Sellers) or, if earlier, has
not been cured within thirty (30) days after the giving of notice thereof by the
Sellers to the Buyer;
(d) by the Buyer, if the Closing shall not have occurred on or
prior to the latest date to which the Sellers may extend the Closing Date
pursuant to Section 1.4 hereof (including by reason of the Sellers' inability to
satisfy the precondition to Buyer's obligation under this Agreement set forth in
7.3(d), Absence of Certain Breaches; provided, however, that Buyer shall have
satisfied all conditions to the Sellers' performance or obligation under this
Agreement, as set forth in Section 7.2 hereof (except only those conditions to
Sellers' performance which cannot be satisfied by Buyer as a result of a
Sellers' breach of its obligations hereunder or a failure or inability of the
Sellers to satisfy a condition to Buyer's performance or obligation, as set
forth in Section 7.3) and Buyer is prepared, as of the date of such termination,
to satisfy in all material respects its obligations under this Agreement,
including without limitation, Article I hereof;
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(e) by the Buyer, if the environmental assessments conducted by
Buyer pursuant to Section 4.12 reveal Significant Environmental Liabilities. For
purposes of this subparagraph, "Significant Environmental Liabilities" shall
mean the sum of (A) (i) costs and expenses associated with an obligation or
responsibility to conduct cleanup, remedial or response actions at the
Properties, as required by Environmental Law, (ii) costs and expenses associated
with actions that are necessary to come into material compliance with
Environmental Laws, and (iii) fines or penalties incurred pursuant to
Environmental Laws, provided that all liabilities described in subsections (i) -
(iii) above are, in the aggregate, reasonably expected to exceed $10,000,000
over and above any and all Environmental Liabilities and Costs (as defined in
Section 2.14 herein) that may be associated with the Baseline Condition minus
(B) any such costs, expenses, fines and/or penalties included in (A) above which
have been paid or otherwise cured by Sellers prior to the Closing Date (as the
same may be extended pursuant to Section 1.4 hereof); provided, however, that,
in the event the Sellers elect to pay or otherwise cure any such matters, the
Sellers shall fully pay or cure such matter or matters; provided, further
however that, following such payment or cure the remaining unpaid and uncured
Significant Environmental Liabilities shall not exceed an amount equal to the
Threshold Amount. The term "Significant Environmental Liability" shall not
include (i) any actual or potential threats of liability under any Environmental
Law with respect to an actual or potential liability identified solely due to
the nature of the present or former use of any property surrounding the specific
Property, so long as the contamination is not on such Property (or, if such
contamination has migrated onto such Property, if the associated liability is
acknowledged to be the obligation of a third-party unaffiliated with the
Sellers, which third-party is capable of satisfying such liability to the
reasonable satisfaction of the Buyer), (ii) any liability for cleanup, remedial
or response actions not required to be performed pursuant to any Environmental
Law, or (iii) any liability for which the responsible party is reasonably likely
to be a party other than an Acquired Company. For purposes of this subparagraph,
"Baseline Condition" shall mean any and all environmental conditions, including
levels of hazardous materials, of, at or related to the Properties as
established by the reports listed in, or the items disclosed on, Schedule 2.14
hereof; or
(f) by the Sellers if the Sellers decide to enter into a binding
definitive agreement to effect a Superior Proposal; provided, however, that the
Sellers shall first (i) notify Buyer in writing at least five (5) business days
prior to Sellers entering into any binding agreement to effect a Superior
Proposal, and (ii) include in such notice to the Buyer detailed disclosure of
all of the terms and conditions of any Superior Proposal and the Sellers shall
be jointly and severally liable for any payment required under Section 9.2(b)
hereof.
Time shall be of the essence for the purposes of this Section 9.1.
Section 9.2 Effect of Termination.
(a) In the event of termination of this Agreement as provided in
Section 9.1, this Agreement shall forthwith become void and there shall be no
liability on the part of any
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party hereto except (a) as set forth in Sections 1.2, 2.17, 3.6, 4.4, and
Articles 8, 9 and 10, provided, however, that nothing herein shall relieve
either party from liability for any willful breach hereof.
(b) In the event that on or after the date hereof (provided,
however, that Sellers shall have no such right to terminate this Agreement
pursuant to Section 9.1(f) hereof at any time after March 31, 1999), any Seller
terminates this Agreement pursuant to the provisions of Section 9.1(f) hereof,
Sellers shall jointly or severally pay, or cause to be paid to Buyer at the time
of termination of this Agreement, and Buyer shall receive (in addition to the
return of the Deposit (together with interest (if any) actually earned thereon)
contemplated by Section 9.2(c) hereof), as liquidated damages and its sole and
exclusive remedy therefor, the greater of (i) the sum of Twenty-Four Million
U.S. Dollars (US$24,000,000.00), or (ii) fifty percent (50%) of the difference
between the Purchase Price under the terms of this Agreement and the total gross
value of the Superior Proposal accepted by the Sellers, and each party shall be
relieved and released from any further liability and obligation hereunder.
Sellers and the Buyer agree that actual damages accruing from such a termination
of this Agreement are incapable of precise estimation and would be difficult to
prove, that the payments stipulated in this Section 9.2(b) bear a reasonable
relationship to the potential injury likely to be sustained in the event of such
a breach and that the stipulated payments are intended by the parties to provide
just compensation in the event of such a breach and are not intended to compel
performance or to constitute a penalty for nonperformance. If the Sellers fail
to pay promptly to the Buyer any amounts due under this Section 9.2(b), the
Sellers shall be jointly and severally obligated to pay all costs and expenses
(including legal fees and expenses) in connection with any action, including the
filing of any lawsuit or other legal action, taken to collect payment, together
with interest on the amount of any unpaid amount from the date such amount was
required to be paid at an interest rate equal to the prime rate published by The
Wall Street Journal from time to time. The parties hereby acknowledge that the
agreements contained in this Section 9.2(b) are an integral part of the
transactions contemplated by this Agreement.
(c) Upon termination of this Agreement by the parties hereto
pursuant to Section 9.1(a), by the Sellers pursuant to Section 9.1(f) or by
Buyer pursuant to Section 9.1(d) or 9.1(e), Buyer shall be entitled, pursuant to
Section 1.2(a)(i) hereof, to the return of the Deposit and all interest (if any)
actually earned thereon and such return, except as provided in Section 9.2(b),
shall constitute Buyer's sole and exclusive remedy for any such termination.
(d) Upon termination by the Sellers pursuant to Section 9.1(b) or
9.1(c) hereof, the Deposit and all interest (if any) actually earned thereon
shall be delivered when, as and if permitted by Sections 1.2(a)(ii), 1.2(b) and
1.2(c) hereof.
Section 9.3 Waiver. At any time prior to the Closing, the Buyer and
the Sellers hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any inaccuracies
in the representations and warranties of the
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other party contained herein or in any document delivered by the other party
pursuant hereto or (c) waive compliance with any of the agreements of the other
party or conditions to its own obligations contained herein. Any such extension
or waiver shall be valid only if set forth in an instrument in writing signed by
the party to be bound thereby. Waiver of any term or condition of this Agreement
by a party shall not be construed as a waiver of any subsequent breach or waiver
of the same term or condition by such party, or a waiver of any other term or
condition of this Agreement by such party. The failure of any party to assert
any of its rights hereunder shall not constitute a waiver of any such rights.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Notices. All notices, requests, claims, demands and
other communications under this Agreement will be in writing and will be deemed
given if delivered personally, sent by overnight courier (providing proof of
delivery), or via facsimile to the parties at the following addresses (or at
such other address for a party as specified by like notice):
(a) if to REITCO, to:
Meditrust Corporation
000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attn: President
Facsimile (000) 000-0000
with copies to:
Meditrust Corporation
000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attn: General Counsel
Facsimile (000) 000-0000
and
Xxxxxxx, Procter & Xxxx LLP
Exchange Place
Boston, MA 02109
Attn: Xxxxxxx X. Xxxxx, P.C.
Facsimile (000) 000-0000
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and
Xxxxxxx, Procter & Xxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx X. Xxxxxxx, Esq.
Facsimile (000) 000-0000
(b) if to Operating Company, to:
Meditrust Operating Company
000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attn: President
Facsimile: (000) 000-0000
with copies to:
Meditrust Corporation
000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attn: General Counsel
Facsimile (000) 000-0000
and
Xxxxxxx, Procter & Xxxx LLP
Exchange Place
Boston, MA 02109
Attn: Xxxxxxx X. Xxxxx, P.C.
Facsimile (000) 000-0000
and
Xxxxxxx, Procter & Xxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx X. Xxxxxxx, Esq.
Facsimile (000) 000-0000
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(c) if to the Buyer, to:
Golf Acquisitions, L.L.C.
0000 XXX Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000-0000
Attn: Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to:
ClubCorp, Inc.
0000 XXX Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000-0000
Attn: General Counsel
Facsimile: (000) 000-0000
and a copy to:
Munsch, Hardt, Xxxx & Xxxx
0000 Xxxx Xxxxxx
0000 Xxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Attn: Xxxx Xxxxxxxxxx, Esq.
Facsimile: (000) 000-0000
Section 10.2 Certain Definitions. For purposes of this Agreement:
(a) An "Affiliate" of any Person means another Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first Person;
(b) "Business Day" means any day that is not a Saturday, a Sunday
or other day on which banks are required by law to be closed in New York City or
Boston, Massachusetts;
(c) "Encumbrance" means any security interest, pledge, mortgage,
lien (including without limitation, environmental and tax liens), charge,
encumbrance adverse claim, preferential arrangement or restriction of any kind;
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(d) "Losses" of a Person means any and all losses, liabilities
(including liabilities for Taxes), damages, claims, awards, judgments, costs and
expenses (including, without limitation, reasonable attorneys' fees) actually
suffered or incurred by such Person;
(e) "Person" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity; and
(f) a "Subsidiary" of any Person means another Person, an amount
of the voting securities, other voting ownership or voting partnership interests
of which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
Person. A "Significant Subsidiary" means any subsidiary of the Buyer or Sellers,
as the case may be, that would constitute a "significant subsidiary" of such
party within the meaning of Rule 1-02 of Regulation S-X of the SEC.
Section 10.3 Interpretation. When a reference is made in this
Agreement to an Article, Section, Annex or Exhibit, such reference will be to an
Article or Section of, or an Annex or Exhibit to, this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and will not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they will be deemed to be
followed by the words "without limitation". The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement will refer
to this Agreement as a whole and not to any particular provision of this
Agreement. All terms used herein with initial capital letters have the meanings
ascribed to them herein and all terms defined in this Agreement will have such
defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such term. Any agreement, instrument or statute defined or referred
to herein or in any agreement or instrument that is referred to herein means
such agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and references to all attachments thereto and instruments incorporated
therein. References to a Person are also to its permitted successors and
assigns.
Section 10.4 Counterparts. This Agreement may be executed in one or
more counterparts, all of which will be considered one and the same agreement
and will become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties.
Section 10.5 Entire Agreement; No Third-Party Beneficiaries;
Severability. This Agreement (including the documents and instruments referred
to herein), together with the
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Confidentiality Agreement, constitutes the entire agreement, and supersedes all
prior agreements and understandings (except for the Confidentiality Agreement),
both written and oral, among the parties with respect to the subject matter of
this Agreement. If any term, condition or other provision of this Agreement is
found to be invalid, illegal or incapable of being enforced by virtue of any
rule of law, public policy or court determination, all other terms, conditions
and provisions of this Agreement shall nevertheless remain in full force and
effect.
Section 10.6 Amendment. This Agreement may not be amended or modified
except (a) by an instrument in writing signed by, or on behalf of, the Sellers
and the Buyer or (b) by a waiver in accordance with Section 9.3.
Section 10.7 Governing Law. This Agreement will be governed by, and
construed in accordance with, the internal laws of The Commonwealth of
Massachusetts regardless of the laws that might otherwise govern under
applicable principles of conflict of laws.
Section 10.8 Assignment. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement may be assigned, in whole
or in part, by operation of law or otherwise by either of the parties hereto
without the prior written consent of the other party. Any assignment in
violation of the preceding sentence will be void. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns. The
parties hereto acknowledge and agree that the rights, interests and obligations
under this Agreement shall remain, in the case of REITCO, exclusively with
REITCO in the event REITCO spins-off its health care financing business as
disclosed by the Sellers in a press release issued November 12, 1998.
Section 10.9 Expenses. Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the Buyer or the Sellers, as applicable, incurring such costs and
expenses, whether or not the Closing shall have occurred; provided, however,
that, in the event a filing or filings of a Notification Form pursuant to the
HSR Act is required, any filing fee or fees due in connection therewith shall be
shared equally by the parties hereto.
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EXECUTION COPY
61
IN WITNESS WHEREOF, Meditrust Corporation, Meditrust Operating
Company and the Buyer have caused this Agreement to be signed by their
respective officers thereunto duly authorized, all as of the date first written
above.
MEDITRUST CORPORATION
By: /s/Xxxxxxx X. Xxxxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Senior Vice President
MEDITRUST OPERATING COMPANY
By: /s/ Xxxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxx
Title: President
GOLF ACQUISITIONS, L.L.C.
By: /s/ Xxxxxx X. Xxxxxx, Xx.
---------------------------------
Name: Xxxxxx X. Xxxxxx, Xx.
Title: Chief Executive Officer
EXECUTION COPY
