EXECUTION COPY
Exhibit 1.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MHC THOUSAND TRAILS TRUST
THOUSAND TRAILS ACQUISITION, INC.
KTTI HOLDING COMPANY, INC.
AND
THOUSAND TRAILS OPERATIONS HOLDING COMPANY, L.P.
DATED AS OF
AUGUST 2, 2004
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as August 2,
2004, is by and among MHC THOUSAND TRAILS TRUST, a Maryland real estate
investment trust ("MHC"), THOUSAND TRAILS ACQUISITION, INC., a Delaware
corporation which is wholly-owned by MHC ("ACQUISITION"), KTTI HOLDING COMPANY,
INC., a Delaware corporation (the "COMPANY") and THOUSAND TRAILS OPERATIONS
HOLDING COMPANY, L.P., a Delaware limited partnership and subsidiary of the
Company ("OPERATIONS"). MHC, Acquisition, Company and Operations are referred to
herein collectively as the "PARTIES" and individually as a "PARTY". Article XI
hereof contains references to sections of this Agreement where various
capitalized terms are defined.
RECITALS
A. The Parties hereto desire to enter into this Agreement and, subject
to the terms and conditions hereof, consummate the transactions contemplated
hereby pursuant to which MHC will acquire all of the capital stock of the
Company through a merger of Acquisition with and into the Company (as more fully
described in Section 1.1 hereof, the "MERGER"), with the Company being the
Surviving Corporation.
B. Prior to the Effective Time, the Company and its subsidiary
companies shall have effected a reorganization (the "TRAILS REORGANIZATION") in
accordance with agreements to be mutually agreed upon by the Parties (the
"REORGANIZATION DOCUMENTS"), pursuant to which, inter alia, (a) the subsidiaries
of the Company listed on Exhibit A attached hereto (each, an "ACQUIRED
SUBSIDIARY" and collectively, the "ACQUIRED SUBSIDIARIES") shall remain as
direct or indirect subsidiaries of the Company (the Company, together with the
Acquired Subsidiaries, each, an "ACQUIRED COMPANY" and collectively, the
"ACQUIRED COMPANIES"), (b) the Company shall transfer to Operations ownership of
all of the capital stock and equity of each of the subsidiaries of the Company
listed on Exhibit B attached hereto (each, a "DISTRIBUTED COMPANY" and
collectively, the "DISTRIBUTED COMPANIES"), (c) the Company shall transfer to
Operations the other specified assets and all liabilities of operating and
managing (i) membership campgrounds, (ii) reciprocal use and affiliation
programs for use of campgrounds, and (iii) campgrounds for third parties,
including the United States Forest Service (the "OPERATING BUSINESS"), and (d)
the Company shall distribute to its stockholders equity interests of Operations,
cash and secured notes in a form and an amount to be mutually agreed upon by the
Parties (the "NOTES") in redemption of a portion of the outstanding Company
Common Stock.
C. Operations desires the other Parties to enter into this Agreement
and to consummate the transactions contemplated hereby.
D. Each of MHC and Operations acknowledges and agrees that the Trails
Reorganization will be completed in connection with and as a condition precedent
to the transactions contemplated by this Agreement and that the Trails
Reorganization would not be completed in the absence of this Agreement. Each of
the Parties acknowledge and agree that Operations will receive adequate and
valuable consideration in the Trails Reorganization for its obligations under
this Agreement, including Operations' indemnification obligations pursuant to
Article VIII hereof. Each of MHC and Acquisition acknowledge and agree that
Operations will
be the sole source of any payments in respect of any indemnification obligations
of Operations pursuant to Article VIII hereof.
E. Concurrently with the execution hereof, pursuant to the written
consent of the holders of a majority of the voting capital stock of the Company
made in accordance with Section 228 of the General Corporation Law of the State
of Delaware (the "DGCL"), the requisite Stockholders of the Company have
approved both the Merger and the Trails Reorganization.
F. At the Closing, pursuant to an agreement between MHC Operating
Limited Partnership (or an Affiliate thereof other than MHC or any direct or
indirect subsidiary of MHC (such entity, the "NOTE PURCHASER")) and the
Stockholders (the "NOTE PURCHASE AGREEMENT"), the Note Purchaser will purchase
the Notes from the Stockholders for an aggregate amount to be mutually agreed
upon by the Parties prior to the Closing (the "NOTE PURCHASE PRICE").
G. Operations and the Company, on the one hand, and MHC and
Acquisition, on the other hand, desire to make certain representations,
warranties, covenants and other agreements in connection with the transactions
contemplated hereby.
AGREEMENT
In consideration of the representations, warranties, covenants and other
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties agree as
follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the satisfaction of the
conditions set forth in this Agreement, at the Effective Time, (a) Acquisition
shall be merged with and into the Company, (b) the separate corporate existence
of Acquisition shall cease, and (c) the Company shall continue as the surviving
corporation (the "SURVIVING CORPORATION") in the Merger under the laws of the
State of Delaware.
1.2 Closing and Closing Date. Subject to the terms and conditions of
this Agreement, the closing of the Merger (the "CLOSING") shall take place at
the offices of Xxxxxx Xxxxxx Xxxxx Xxxxxxxx, 000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxxxxx 00000, at 10:00 a.m. local time, on (a) the next business day
after the last to be fulfilled or waived of the conditions set forth in Article
VII hereof or (b) at such other time, date or place as the Company and MHC may
agree in writing. The date on which the Closing occurs is referred to herein as
the "CLOSING DATE." Subject to the satisfaction of the closing conditions
specified herein, the Parties anticipate that the Closing shall occur on or
about October 1, 2004. The Parties hereby acknowledge and agree that the Closing
shall be a standard "New York style" real estate transaction without imposing
additional substantive obligations on the Parties.
1.3 Effective Time of the Merger. On the Closing Date, the Parties shall
cause a certificate of merger, or other appropriate documentation (the
"CERTIFICATE OF MERGER"),
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satisfying the requirements of the DGCL to be filed with the office of the
Secretary of State of the State of Delaware in accordance with the provisions of
the DGCL. When used herein, the term "EFFECTIVE TIME" shall mean the date and
time when the Certificate of Merger has been accepted for filing by the
Secretary of State of the State of Delaware or such date and time as otherwise
specified in the Certificate of Merger.
1.4 Effects of the Merger. The Merger shall, from and after the
Effective Time, have the effects provided in this Agreement and the applicable
provisions of the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time all the properties, rights, privileges,
powers, immunities and franchises of Acquisition and the Company shall vest in
the Surviving Corporation, and all debts, liabilities and duties of Acquisition
and the Company shall become the debts, liabilities and duties of the Surviving
Corporation. If at any time after the Effective Time any further action is
deemed necessary or desirable to carry out the purposes of this Agreement, the
Parties agree that the Surviving Corporation and its proper officers and
directors shall be authorized to take, and shall take, any and all such action.
Operations covenants that, as a result of the Merger and the Trails
Reorganization, as of the Effective Time neither the Company nor any of the
Acquired Subsidiaries shall have (i) any liabilities except as set forth on
Schedule 1.4 (the "ASSUMED LIABILITIES") or (ii) any employees. MHC shall not
assume any liabilities of the Acquired Companies other than the Assumed
Liabilities. Each of the Company and Operations covenants that as of the
Effective Time the Acquired Companies shall own the Real Property (including the
Excess Land) free and clear of Liens except as set forth on Schedule 1.4. For
purposes hereof the definition of "EXCESS LAND" shall have the meaning set forth
in the Ground Lease which meaning shall be mutually agreed upon by the Parties
prior to the Closing.
ARTICLE II
THE SURVIVING CORPORATION
2.1 Certificate of Incorporation. The Certificate of Merger shall
include such amendments, schedules or supplements as may be required under the
DGCL to provide that the Certificate of Incorporation of the Surviving
Corporation from and after the Effective Time shall be, or be the same as, the
Certificate of Incorporation of Acquisition as in effect immediately prior to
the Effective Time, until thereafter changed or amended as provided therein or
by applicable law; provided, however, that the name of the Surviving Corporation
shall be the name specified in Section 2.4 hereof.
2.2 By-Laws. The By-Laws of Acquisition as in effect immediately prior
to the Effective Time shall be the By-Laws of the Surviving Corporation from and
after the Effective Time, until thereafter changed or amended as provided
therein or by applicable law.
2.3 Board of Directors and Officers. The board of directors and officers
of Acquisition immediately prior to the Effective Time shall be appointed as the
board of directors and officers, respectively, of the Surviving Corporation,
effective as of the Effective Time, and until the earlier of their respective
resignations or the time that their respective successors are duly elected or
appointed and qualified.
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2.4 Name of Surviving Corporation. The name of the Surviving Corporation
shall be MHC TT Holding Company, Inc.
ARTICLE III
CONVERSION AND CANCELLATION OF SECURITIES; CONVERSION PRICE
3.1 Certain Definitions. Except as otherwise provided herein, the
capitalized terms set forth below shall have the following meanings ascribed
thereto:
"AFFILIATE" shall mean, as to any Person, any other Person, which,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person. For the purposes of this definition, "control" means the
possession of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.
"COMPANY COMMON STOCK" shall mean the Company's common stock, par value
$0.01 per share, of which 4,000,000 shares are authorized and 3,600,000 shares
are issued and outstanding as of the date hereof.
"STOCKHOLDERS" shall mean the holders of the Company Common Stock and
Options immediately prior to the Effective Time.
3.2 Conversion of Shares. As of the Effective Time, by virtue of the
Merger and without any action on the part of the Parties:
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time shall be cancelled and extinguished and
converted into the right to receive the Conversion Price per Share, as
determined in accordance with the provisions of Section 3.4 hereof, and payable
in accordance with the provisions of Section 3.5 hereof.
(b) Each share of Company Common Stock held in the Company's
treasury or in the treasury of any subsidiary of the Company immediately prior
to the Effective Time, if any, shall be cancelled and extinguished without the
payment of any consideration therefor.
(c) Each share of capital stock of Acquisition issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one fully paid and non-assessable share of the common stock of the
Surviving Corporation.
3.3 Stockholders; Conversion Price per Share. Two business days prior to
the Closing Date, the Company shall deliver to MHC a certificate in the form of
Exhibit C attached hereto (the "CONVERSION CERTIFICATE"), which will be attached
to, and become a part of, this Agreement and will set forth the name of each
Stockholder, the aggregate Company Common Stock and Options owned thereby, the
exercise price for such Options, and the portion of the Aggregate Conversion
Amount allocable to such Stockholder. Each of the Company and Operations
represents, warrants and covenants that the information provided in the
Conversion Certificate shall be true, accurate and complete and shall be in
accordance with all applicable
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organizational documents, instruments, agreements and certificates that create
or relate to the Company Common Stock and Options.
3.4 Determination of Conversion Price. The Aggregate Conversion Amount
and the Conversion Price per Share shall be determined as follows:
(a) The "AGGREGATE CONVERSION AMOUNT" shall be an amount equal to
ONE HUNDRED SIXTY MILLION DOLLARS ($160,000,000) minus the Indebtedness of the
Company and the Acquired Subsidiaries shown on the Indebtedness Certificate, and
minus the Note Purchase Price shown on the Indebtedness Certificate.
(b) The "CONVERSION PRICE PER SHARE" means the amount set forth on
the Conversion Certificate as the Conversion Price Per Share.
3.5 Payment for the Shares.
(a) From and after the Effective Time, in accordance with the last
sentence of this Section 3.5(a), U.S. Bank, N.A. shall act as paying agent (the
"PAYING AGENT") in effecting the payment of the Aggregate Conversion Amount in
respect of certificates (the "CERTIFICATES") that, prior to the Effective Time,
represented Company Common Stock or Options entitled to payment of the Aggregate
Conversion Amount pursuant to the Conversion Certificate. At the Effective Time,
MHC or Acquisition shall deposit, or cause to be deposited, with the Paying
Agent the Aggregate Conversion Amount to which the Stockholders shall be
entitled pursuant to this Article III. The expenses of and any indemnification
obligations to the Paying Agent shall be the sole responsibility of Operations.
(b) At or prior to the Effective Time, the Company shall provide
to each record holder of Certificates that immediately prior to the Effective
Time represented Company Common Stock or Options a form of letter of transmittal
in a customary form mutually agreed upon by the Parties (the "LETTER OF
TRANSMITTAL") which shall, among other things, specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Paying Agent, and instructions for
use in surrendering such Certificates and receiving the Aggregate Conversion
Amount in respect thereof. MHC shall cause the Paying Agent to mail the Letter
of Transmittal to each Stockholder as promptly as practicable. Upon the
surrender of each such Certificate, the Paying Agent shall pay the holder of
such Certificate an aggregate amount equal to (i) the Conversion Price per Share
multiplied by (ii) the number of shares of Company Common Stock formerly
represented by such Certificate, in consideration therefor, and such Certificate
shall forthwith be cancelled. Until so surrendered, each such Certificate (other
than Certificates representing Company Common Stock held by the Company or held
in the treasury of the Company) shall represent solely the right to receive the
Conversion Price per Share multiplied by the number of shares of Company Common
Stock represented thereby. No interest or dividends shall be paid or accrued on
the Conversion Price per Share. If the Conversion Price per Share (or any
portion thereof) is to be delivered to any Person other than the Person in whose
name the Certificate formerly representing Company Common Stock surrendered
thereof is registered, it shall be a condition to such right to receive payment
of such Conversion Price per Share that the Certificate so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
Person requesting such payment
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shall pay to the Paying Agent the transfer or other similar taxes required by
reason of payment of the Conversion Price per Share to a Person other than the
registered holder of the Certificate so surrendered, or shall establish to the
satisfaction of the Paying Agent that such tax has been paid or is not
applicable.
(c) After the Effective Time, there shall be no transfers on the
stock transfer books of the Surviving Corporation of any shares of Company
Common Stock which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates formerly representing shares of Company
Common Stock are presented to the Surviving Corporation or the Paying Agent,
they shall be surrendered and cancelled in return for the payment of the
Conversion Price per Share relating to each such share, as provided in this
Article III.
(d) In the event that any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such Person of a bond in such
reasonable amount, and otherwise in such substance and form as the Surviving
Corporation may reasonably direct as indemnity for the Surviving Corporation,
MHC and the Paying Agent with respect to such Certificate, the Paying Agent will
issue in exchange for such lost, stolen or destroyed Certificate the portion of
the Aggregate Conversion Amount with respect to such Certificate to which such
Person is entitled pursuant to this Article III.
3.6 Stock Options. Prior to the Effective Time, the Company's Board of
Directors (or, if appropriate, any committee thereof) shall adopt appropriate
resolutions and take all other actions necessary to (i) provide for the
cancellation or exercise, effective at the Effective Time, of all the
outstanding stock options or similar rights (the "OPTIONS") theretofore granted
under the Equity Incentive Plan of the Company (the "STOCK OPTION PLAN"),
without any payment therefor except as otherwise provided in this Section 3.6,
and (ii) terminate the Stock Option Plan as of the Effective Time. Each Option,
to the extent unexercised as of the Effective Time, shall thereafter no longer
be exercisable but shall entitle each holder thereof, in cancellation and
settlement therefor, to a payment in cash by the Company (subject to any
applicable withholding taxes), at the Effective Time, equal to the amount set
forth on the Conversion Certificate in respect of such Option (such amounts
payable hereunder being referred to as the "OPTION PAYMENTS"). At the Effective
Time, MHC or Acquisition shall deposit, or cause to be deposited, with the
Paying Agent, in accordance with Section 3.5(a) hereof, the aggregate Option
Payments due pursuant to this Section 3.6. Upon surrender of the certificate for
an Option by the holder of such Option to the Paying Agent, the Paying Agent
shall pay to such Option holder, on behalf of the Company and subject to any
applicable withholding taxes, the Option Payments due under this Section 3.6
with respect to such Option.
3.7 Repayment of Company Indebtedness. At the Effective Time, MHC will,
or will cause the Surviving Corporation or any of its subsidiaries to, repay in
full all amounts owing pursuant to, and discharge all of the Company's and its
subsidiaries' (including both Acquired Companies and Distributed Companies)
obligations under, the agreements governing the indebtedness identified on the
Indebtedness Certificate. Each of the Company and Operations covenants that
following payment by MHC of all Indebtedness listed on the Indebtedness
Certificate, none of the Acquired Companies shall have any obligation for
outstanding
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Indebtedness. For purposes hereof, "INDEBTEDNESS" shall mean, with respect to
the Acquired Companies, as of the Closing Date, without duplication, (i) all
indebtedness for borrowed money, including, but not limited to, all obligations
evidenced by bonds, debentures, notes or similar instruments, or upon which
interest payments are customarily made, (ii) all purchase money indebtedness,
including, but not limited to, the principal portion of all obligations under
capital leases, (iii) all guaranty obligations of any of the Acquired Companies
with respect to the indebtedness of any other Person for borrowed money,
including, but not limited to, the indebtedness for borrowed money of any of the
Distributed Companies, (iv) all obligations issued or assumed as the deferred
purchase price of property or services purchased by any Acquired Company that
should appear as liabilities on a balance sheet in accordance with generally
accepted accounting principles as in effect as of the Closing Date consistently
applied ("GAAP"), (v) the principal balance outstanding under any synthetic
lease, tax retention operating lease or similar off-balance sheet financing
where such transaction is considered borrowed money indebtedness for tax
purposes but is classified as an operating lease in accordance with GAAP, (vi)
all obligations in respect of interest rate protection agreements, foreign
currency exchange agreements, commodity purchase agreements or other similar
exchange, swap or hedging agreements, and (vii) the maximum amount of any
standby letters of credit or acceptances issued or created for the account of
any Acquired Company, including, in each case, the current maturities thereof
and any and all interest accrued but unpaid as of the Closing Date; provided,
however, that Indebtedness shall not include (i) the Notes, (ii) any obligation
under any ground lease that remains an obligation of, or is transferred to, any
of the Acquired Companies in connection with the transactions contemplated by
this Agreement or (iii) any liability transferred pursuant to the Trails
Reorganization Documents to Operations (or any of its subsidiaries after giving
effect to the Trails Reorganization).
3.8 Further Assurances. At and after the Effective Time, the officers
and directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of the Company or Acquisition, as applicable,
any deeds, bills of sale, assignments or assurances and to take and do, in the
name and on behalf of the Company or Acquisition, as applicable, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under any
of the rights, properties or assets acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger.
3.9 Transactions and Documents at Closing.
(a) At the Closing: (i) the Parties shall cause to be delivered to
the Secretary of State of the State of Delaware duly executed and verified
copies of the Certificate of Merger as required by the DGCL to effect the
Merger, and take such further actions as may be required by the DGCL to make the
Merger effective upon the terms and subject to the conditions set forth in this
Agreement; and (ii) the Parties shall use reasonable efforts to deliver to each
other the respective agreements, legal opinions and other documents and
instruments specified herein, including, but not limited to, the documents and
instruments specified in Article VII hereof to be delivered as a condition
precedent to Closing.
3.10 Escheatment of Funds. None of the Parties nor any other Person shall
be liable to any former Stockholder for any amount properly delivered to a
public official pursuant to
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applicable abandoned property, escheat or similar laws. Any such amounts
remaining unclaimed by any Stockholder immediately prior to such time when such
amounts would otherwise escheat to or become the property of any Governmental
Entity, shall, to the extent permitted by applicable laws, become the property
of MHC, free and clear of all claims or interest of any Person previously
entitled thereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF OPERATIONS AND THE COMPANY
After giving effect to the Trails Reorganization, each of the Company
and Operations represents and warrants to MHC and Acquisition as follows:
4.1 Organization and Authority.
(a) Each of the Acquired Companies is a corporation or other legal
entity duly organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation or formation (each of which jurisdictions is
listed on Schedule 4.1(a) attached hereto). Each of the Acquired Companies has
the corporate or other entity power to own its properties and to carry on its
business as now being conducted.
(b) Each Acquired Company is duly qualified to do business and is
in good standing as a foreign corporation or organization in each jurisdiction
(each of which jurisdictions is listed on Schedule 4.1(b)) in which the failure
to be so qualified would have or would reasonably be expected to have a Material
Adverse Effect.
(c) As used herein, the term "MATERIAL ADVERSE EFFECT" means, with
respect to the Acquired Companies, an act, omission, circumstance, event,
occurrence, change or effect that, individually or in the aggregate, is
materially adverse to the assets, business or financial condition or results of
operations of the Acquired Companies taken as a whole (other than circumstances,
events, occurrences, changes or effects affecting the campground industry or the
value of real property generally, unless the Acquired Companies are
disproportionately affected by such circumstance, event, occurrence, change or
effect).
(d) Operations has delivered to MHC true, correct and complete
copies of (i) the Certificate or Articles of Incorporation and By-Laws of each
Acquired Company as in effect on the date hereof and (ii) the stockholder
records and minute books or other corporate records of such Acquired Company as
of the date hereof.
4.2 Acquired Companies' Capital Structure.
(a) Schedule 4.2(a) sets forth, as of the date hereof: (i) the
authorized number of shares of each class of capital stock of the Company and
(ii) for each Stockholder, the number of shares of each class of capital stock
of the Company issued to such Stockholder and outstanding as of the date of this
Agreement. All such capital stock is held of record by the Stockholders as set
forth on Schedule 4.2(a) and no other individual, corporation, partnership,
association, trust, any other organization or entity or government or agency or
political subdivision thereof ("PERSON") is the record or beneficial owner of
any shares of the capital
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stock of the Company as of the date hereof. All outstanding shares of the
capital stock of the Company are duly authorized, validly issued, fully paid and
non-assessable and are not subject to preemptive rights created by statute, the
Certificate of Incorporation or the By-Laws of the Company or any agreement to
which the Company is a party or by which the Company is bound. All outstanding
shares of capital stock of the Company have been issued in compliance with
applicable federal and state securities laws. As of the date hereof, there are
no dividends declared or accrued, but not paid, in respect of any of the shares
of the Company Common Stock.
(b) Schedule 4.2(b) sets forth, as of the date hereof: (i) the
authorized number of shares of each class of capital stock of each Acquired
Subsidiary and (ii) the number of shares of such capital stock of each Acquired
Subsidiary issued to each stockholder of such Acquired Subsidiary and
outstanding as of the date of this Agreement. All such capital stock is held of
record by the stockholders as set forth on Schedule 4.2(b) and no other Person
is the record or beneficial owner of any shares of the capital stock of any
Acquired Subsidiary as of the date hereof. All outstanding shares of the capital
stock of each Acquired Subsidiary are duly authorized, validly issued, fully
paid and non-assessable and are not subject to preemptive rights created by
statute, the Articles or Certificate of Incorporation, the By-Laws or other
organizational document of any Acquired Subsidiary or any agreement to which any
Acquired Subsidiary is a party or by which any Acquired Subsidiary is bound.
Except as set forth on Schedule 4.2(b) and other than restrictions on transfer
under applicable federal and state securities laws, each outstanding share of
capital stock of each Acquired Subsidiary is free and clear of any lien, charge,
security interest, pledge, option, right of first refusal, voting proxy or other
voting agreement, or encumbrance of any kind or nature restricting the transfer
or other exercise of any attributes of ownership. All outstanding shares of the
capital stock of each Acquired Subsidiary have been issued in compliance with
applicable federal and state securities laws. As of the date hereof, except as
set forth on Schedule 4.2(b), there are no dividends declared or accrued, but
not paid, in respect of any of the shares of the capital stock of any Acquired
Subsidiary.
(c) Except as set forth on Schedule 4.2(c), there are no options,
warrants, calls, rights, commitments or agreements of any character, written or
oral, to which any Acquired Company is a party or by which any Acquired Company
is bound obligating any Acquired Company to issue, deliver, sell, repurchase or
redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of any Acquired Company, or obligating any Acquired Company to grant,
extend, accelerate the vesting of, change the price of, otherwise amend or enter
into any such option, warrant, call, right, commitment or agreement. There are
no outstanding or authorized stock appreciation, phantom stock, profit
participation, or other similar equity-related rights with respect to any
Acquired Company. There are no voting trusts, proxies or other agreements or
understandings to which any Acquired Company is a party with respect to the
voting stock of any Acquired Company.
(d) Except for other Acquired Companies, no Acquired Company owns
or controls any shares of capital stock or any equity interest in any other
Person.
(e) As of the Effective Time, all of the outstanding capital stock
of each Acquired Subsidiary will be owned directly or indirectly by the Company
and there will be no
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securities or agreements of the type described in subparagraph (c) above with
respect to any capital stock of any Acquired Subsidiary.
4.3 Authority. Each of the Company and Operations (each, a "TRAILS
PARTY"; and collectively, the "TRAILS PARTIES") has all requisite corporate
power and authority to enter into this Agreement and has taken all corporate and
stockholder action necessary to (i) approve the Trails Reorganization and
consummate the transactions contemplated by the Reorganization Documents and
(ii) approve the Merger and consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by each of the Trails
Parties and constitutes the valid and binding obligation of each Trails Party,
enforceable in accordance with its terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies. The execution and delivery of this Agreement
by either Trails Party does not, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of, or
default under (with or without notice or lapse of time, or both), or give rise
to a right of termination, cancellation or acceleration of any obligation or
loss of any material benefit under (any such event, a "CONFLICT") (i) any
provision of the Certificate of Incorporation or By-Laws of Operations or any of
the Acquired Companies, or (ii) except for the consents and approvals set forth
on Schedule 4.3 (the "REQUIRED CONSENTS"), any Contract, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to any of the
Acquired Companies or any of their properties or assets except, in the case of
clause (ii) above, as would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect. No consent, waiver, approval, order
or authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other federal, state, county, local or
foreign governmental authority, instrumentality, agency or commission
("GOVERNMENTAL ENTITY") is required by Operations or any of the Acquired
Companies either in connection with its execution and delivery of this Agreement
or its consummation of the transactions contemplated hereby, except (x) for
compliance with the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"), if applicable, and (y) for the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware.
4.4 Company Financial Statements. Schedule 4.4 contains the unaudited
balance sheet as of June 30, 2004 and the unaudited statement of income for the
twelve months ended June 30, 2004 of Thousand Trails, Inc. ("THOUSAND TRAILS")
and its subsidiaries (the "UNAUDITED JUNE 30, 2004 FINANCIAL STATEMENTS"), as
well as the audited balance sheets of Thousand Trails on a consolidated basis as
of June 30, 2003, and the audited statements of income, cash flow and
stockholders' equity of Thousand Trails on a consolidated basis for the 12
months ended June 30, 2003, respectively, together with the consolidating
schedules thereto (collectively, the "AUDITED FINANCIAL STATEMENTS"; and,
together with the Unaudited June 30, 2004 Financial Statements, the
"FINANCIALS"). The balance sheet included in the Audited Financial Statements is
referred to herein as the "CURRENT BALANCE SHEET." Except as set forth on
Schedule 4.4, the Audited Financial Statements (including the notes thereto)
have been prepared from the books and records of Thousand Trails and its
subsidiaries in accordance with GAAP as in effect as of the date of the
applicable statement as applied by Thousand Trails on a basis consistent
throughout the periods indicated; and the Financials present fairly, in all
material respects, the financial condition and operating results of Thousand
Trails on a consolidated basis
10
as of the dates thereof and during the periods indicated therein. The Company is
a holding company and has no assets other than the capital stock of Thousand
Trails and has no liabilities other than those incurred as a result of, and
relating to, the ownership of the Thousand Trails capital stock including in
respect of (i) any Indebtedness identified on the Indebtedness Certificate and
(ii) the Notes.
4.5 No Undisclosed Liabilities. Except (a) for liabilities in the
amounts set forth on the face of the Current Balance Sheet (or in the notes
thereto) or (b) as set forth in Schedule 4.5, no Acquired Company has
outstanding any liability, except for (i) liabilities which have been incurred
in the ordinary course of business, consistent with past practices, (ii)
liabilities incurred under any contract, lease, license, indenture, note, bond,
mortgage, agreement or other instrument or obligation resulting from the
performance by an Acquired Company of such contract, lease, license, indenture,
note, bond, mortgage, agreement or other instrument or obligation (but excluding
any liability resulting from any breach, default or violation thereof) and (iii)
other liabilities (including those resulting from a breach, default or violation
of any such contract), in each case which, individually and in the aggregate,
have not had and would not reasonably be expected to have a Material Adverse
Effect. Neither the Company nor any other Acquired Company is liable for any
obligation or liability assumed by the Distributed Companies pursuant to the
Reorganization Documents in connection with the Trails Reorganization.
4.6 No Changes. Except as set forth on Schedule 4.6 or as necessary to
effect the Trails Reorganization, since September 30, 2003, there has not been,
occurred or arisen any:
(a) amendment or change to the Certificate of Incorporation or
By-Laws of any of the Acquired Companies;
(b) capital expenditure or commitment by any of the Acquired
Companies, either individually or in the aggregate, exceeding $750,000;
(c) destruction or damage to or loss of any material assets of any
of the Acquired Companies (whether or not covered by insurance);
(d) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by any of the Acquired
Companies, other than as required by GAAP;
(e) material revaluation by any of the Acquired Companies of any
of its material assets in excess of amounts reserved therefor on the Current
Balance Sheet;
(f) increase (other than increases resulting from the calculation
of reserves in the ordinary course of business consistent with past practice) or
change in any assumptions underlying, or methods of calculating, any reserves
for bad debt, any accruals, any contingency or other reserves;
(g) payment, discharge or satisfaction of any claims,
encumbrances, liabilities or obligations (whether absolute, accrued, contingent
or otherwise and whether due or to become
11
due), other than the payment, discharge or satisfaction of claims, encumbrances,
liabilities or obligations in the ordinary course of business consistent with
past practices;
(h) declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of any of the Acquired Companies
or any direct or indirect redemption, purchase or other acquisition by the
Company of any capital stock of any of the Acquired Companies or any split,
combination or reclassification in respect of any shares of capital stock of any
of the Acquired Companies;
(i) sale, lease, license or other disposition of any material
assets or properties of any of the Acquired Companies, or the creation of any
security interest in such assets or properties, except in each case, in the
ordinary course of business consistent with past practices;
(j) amendment or termination of any Contract, except in each case,
in the ordinary course of business consistent with past practices;
(k) loan by any of the Acquired Companies to any Person, guarantee
by any of the Acquired Companies of any indebtedness of any Distributed Company
or other Person in each case in excess of $750,000, issuance or sale of any debt
securities of any of the Acquired Companies, or creation of any security
interest in any of the Acquired Companies' material assets or material
properties, except for (i) security interests arising in the ordinary course of
business, including security interests in favor of landlords, carriers,
warehousemen, processors, mechanics, materialmen or suppliers, (ii) advances to
employees, directors or consultants for travel and business expenses and (iii)
intercompany loans as between Acquired Companies and Distributed Companies, in
each case in the ordinary course of business, consistent with past practices;
(l) waiver or release of any right or claim of any of the Acquired
Companies, including any write-off or other compromise of any account receivable
of any of the Acquired Companies exceeding $100,000 individually or $1,500,000
in the aggregate;
(m) commencement or receipt of written notice or, to the Knowledge
of the Company, threat of any lawsuit, arbitration or proceeding against or
investigation of any of the Acquired Companies or any of their affairs;
(n) event, condition, occurrence, change or effect that has had or
would reasonably be expected to have a Material Adverse Effect; or
(o) agreement by any of the Acquired Companies or, to the
Knowledge of the Company, by any officer or employee thereof to do any of the
things described in the preceding clauses (a) through (n).
4.7 Tax and Other Returns and Reports.
(a) Definition of Taxes. For purposes of this Agreement, "TAX" or,
collectively, "TAXES," means any and all federal, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and goods and services,
12
value added, ad valorem, transfer, franchise, withholding, payroll, recapture,
employment, excise and property taxes, together with all interest, penalties and
additions imposed with respect to such amounts. As used herein, Taxes shall
include, with respect to any of the Acquired Companies, Taxes payable by reason
of the Company and its subsidiaries (including both the Acquired Subsidiaries
and the Distributed Companies) filing Tax Returns on a consolidated, combined or
unitary basis.
(b) Definition of Tax Sharing Agreement. For purposes of this
Agreement, "TAX SHARING AGREEMENT" shall mean any written or unwritten agreement
or arrangement for (i) the allocation or payment of Tax liabilities or (ii)
payment for Tax benefits, in each case by reason of the Company and its
subsidiaries (including both the Acquired Subsidiaries and the Distributed
Companies) filing Tax Returns on a consolidated, combined or unitary basis with
any Acquired Company.
(c) Tax Returns and Audits. Except as set forth on Schedule 4.7:
(i) Each Acquired Company has prepared and timely filed all
federal, state, local and foreign returns, estimates, information
statements and reports relating to Taxes (the "TAX RETURNS")
relating to such Acquired Company, or any of its assets, required to
be filed by such Acquired Company, on or prior to the date hereof;
and all Tax Returns required to be filed on or before the Effective
Time by or with respect to any Acquired Company, or any of its
assets, have been or will be timely filed on or before the Effective
Time, and all such Tax Returns are, or in the case of Tax Returns to
be filed will be, true, correct and complete in all material
respects;
(ii) Each Acquired Company has duly and timely paid all Taxes
required to be paid by such Acquired Company to any taxing
authority;
(iii) Each Acquired Company has fully and properly withheld
all payroll and similar Taxes that it is required to withhold with
respect to its employees;
(iv) There is no Tax deficiency proposed in writing or
assessed in writing against any Acquired Company that is
outstanding, nor has any Acquired Company executed any waiver of any
statute of limitations on or extending the period for the assessment
or collection of any Tax, which waiver is currently in effect;
(v) As of the date of each of the Financials, any and all
Taxes not yet due and payable as of such date have been adequately
recorded as reserves or current liabilities on the balance sheets
comprising such Financials;
(vi) No Acquired Company has liability for any Taxes to any
authority in any jurisdiction where such Acquired Company does not
file a Tax Return, whether domestic or foreign, including, but not
limited to, income taxes, value added taxes and sales and use taxes,
and no Acquired Company has received any written claim or notice of
examination or audit from any authority in a jurisdiction
13
where such Acquired Company does not file a Tax Return that it is or
may be subject to taxation in that jurisdiction and, to the
Knowledge of the Company, no basis for such a claim exists;
(vii) No Acquired Company has received written notice that an
audit or other examination of any Tax Return of any Acquired Company
is currently in progress, nor has any Acquired Company been notified
in writing of any request for such an audit or other examination;
and no Acquired Company has received written notice of any
Tax-related litigation or proceeding against any Acquired Company
that currently exists or is pending;
(viii) MHC has been provided correct and complete copies of
all federal and state income, franchise, value-added and sales and
use Tax Returns filed by any Acquired Company since June 30, 1998;
(ix) No Acquired Company is a party to a Tax Sharing
Agreement or owes any amount under any such agreement;
(x) No Acquired Company is a party to or is bound by any
closing agreement or offer in compromise with any federal, state,
local or foreign tax authority;
(xi) No Acquired Company is a party to any joint venture or
partnership or other arrangement that the parties thereto treat as a
partnership for federal income tax purposes other than an ownership
interest in another Acquired Company;
(xii) No Acquired Company has agreed to make, nor is it
required to make, any adjustment under Sections 481(a) or 263A of
the Code or any comparable provision of state, local or foreign Tax
laws by reason of a change in accounting method or otherwise. No
Acquired Company has taken any action that could defer a liability
for Taxes of any Acquired Company from any taxable period ending on
or before the Closing Date to any taxable period ending after the
Closing Date;
(xiii) No Acquired Company (A) has been a member of an
affiliated group of corporations, within the meaning of Section 1504
of the Code, filing a consolidated federal income Tax Return (other
than one of which the Company was the common parent), or a member of
a consolidated, combined or unitary group other than a combined,
consolidated or unitary group of which the Company was the common
parent for state, local or foreign Tax purposes; (B) has any
liability for Taxes of any person (other than the Company and its
subsidiaries) under Treasury Regulation 1.1502-6 (or any
corresponding provision of state, local or foreign income Tax law),
as transferee or successor, by contract or otherwise; (C) has filed
a consent pursuant to the collapsible corporation provisions of
Section 341(f) of the Code (or any corresponding provision of state,
local or foreign Tax law) or agreed to have Section 341(f)(2) of the
Code (or any
14
corresponding provision of state, local or foreign Tax law) apply to
any disposition of any asset owned by it; or (D) has made a consent
dividend election under Section 565 of the Code;
(xiv) There are no requests for rulings or determinations in
respect of any Tax pending between, or in respect of, any Tax
authority and any Acquired Company or Distributed Company.
4.8 Restrictions on Business Activities. Except as set forth on Schedule
4.8, there is no agreement (non-compete or otherwise), judgment, injunction,
order or decree to which any Acquired Company is a party or otherwise binding
upon any Acquired Company which prohibits (i) any acquisition or disposition of
property (tangible or intangible) by any Acquired Company, or (ii) any Acquired
Company from engaging in any line of business or competing with any specified
Person.
4.9 Title to Properties; Absence of Liens and Encumbrances.
(a) None of the Acquired Companies leases (as tenant or subtenant)
any real property except pursuant to the leases set forth on Schedule 4.9(a).
The Company has provided MHC with true, correct and complete copies of all such
leases, including all amendments thereto. All such current leases are in full
force and effect, are valid and, to the Knowledge of the Company, effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default by any of the Acquired Companies (or event which
with notice or lapse of time, or both, would constitute a default) which
individually or in the aggregate would constitute a Material Adverse Effect.
Except as identified on Schedule 4.9(a), none of the real property leased (as
tenant or subtenant) by any Acquired Company is shared with or jointly used
with, jointly leased by, or guaranteed by, any Distributed Company. None of the
leases set forth on Schedule 4.9(a) are subject to termination, modification or
acceleration as a result of the consummation of the transactions contemplated
hereby.
(b) The Acquired Companies have good, valid and marketable title
to, or, in the case of leased properties and assets, valid leasehold interests
in, all of their material properties and assets, tangible and intangible, real,
personal and mixed, movable and immovable, used or held for use in their
businesses, free and clear of any liens, mortgages, pledges, charges, security
interests, restrictions, claims or other similar encumbrances (including any
agreement to give any of the foregoing) (collectively, "LIENS"), except (i) as
set forth on Schedule 4.9(b) and (ii) Liens for Taxes not yet delinquent.
(c) Schedule 4.9(c) sets forth a list of all real property
currently owned by the Acquired Companies (the "LAND;" together with all
improvements thereon, the "REAL PROPERTY") other than approximately 1,390
miscellaneous undeveloped lots that are reflected as having zero value on the
Current Balance Sheet (the "SURPLUS LAND"). Except as set forth on Schedule
4.9(c) and except for the Membership Contracts, the Company's extended vacation
or stay programs, the Company's storage programs and other ordinary course
arrangements with members or other campground users, in each case entered into
in the ordinary course of business, there are no leases, subleases or other
occupancy agreements, either written or oral, granting any Person the right of
use or occupancy of any Real Property (or portion thereof). Except for such
15
usual and customary easements, licenses, rights-of-way and other customary
encumbrances and minor title irregularities that do not materially interfere
with the use and operation of the Real Property in the conduct of the Company's
business, the Company or an Acquired Subsidiary, as the case may be, has good
and insurable title to the Real Property and has furnished to MHC true and
complete copies of title insurance reports and title insurance policies with
respect to the Real Property. No Real Property is subject to any Lien that can
be discharged through the payment of a liquidated sum of money other than (i)
Liens imposed by law for Taxes that are not yet delinquent, (ii) Liens in favor
of materialmen, workmen, carriers, warehousepersons or laborers not in excess of
$100,000 in the aggregate, and (iii) as set forth in Schedule 4.9(c). Title to
all of the Real Property is insurable by a nationally recognized title insurance
company selected by MHC and reasonably acceptable to the Company, pursuant to
title insurance policies that are substantially in the same form (including
endorsements) as the title insurance policies issued to iStar ("EXISTING TITLE
POLICIES"), except for (i) non-monetary Liens set forth in the Existing Title
Policies, (ii) Liens specified in clauses (i), (ii) and (iii) of the preceding
sentence, and (iii) non-monetary Liens incurred in the ordinary course of
business since the date of the applicable Existing Title Policy that do not,
individually or in the aggregate, materially affect the value of one or more
campgrounds included in the Real Property or the operation of the business of
the Acquired Companies.
(d) The Real Property and all present uses of and operations at
the Real Property comply with all laws, covenants, conditions, restrictions,
easements, disposition agreements and similar matters affecting the Real
Property, except for such failures to comply as have not had and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. The Acquired Companies have obtained all material approvals of
Governmental Entities (including certificates of use and occupancy, licenses and
permits) required in connection with the construction, ownership, use,
occupation and operation of the Real Property as membership campgrounds. Except
as set forth on Schedule 4.9(d), none of the Acquired Companies has received any
notice of, nor to the Knowledge of the Company is there, any pending or proposed
condemnation proceeding, taking, lawsuit or administrative matter that would
reasonably be expected to materially affect any part of the Real Property or the
Company's operation thereof.
(e) All structures, facilities and improvements on the Real
Property and all structural, mechanical and other physical systems that
constitute a part thereof are in sufficient condition to permit the business and
operations of the Acquired Companies to continue to operate in substantially the
same manner as such business and operations have been historically conducted,
assuming the continuance of capital expenditures consistent with past practices.
No maintenance of or repair to the Real Property or such structures, facilities
and improvements (including any structural, mechanical or other physical system
thereof) has been unreasonably deferred such that Operations, as of the
Effective Time, is unable to conduct the Operating Business and continue its
operations in substantially the same manner as such Operating Business and
operations have been historically conducted, assuming the continuance of such
capital expenditures consistent with past practices.
16
4.10 Intellectual Property.
(a) For purposes of this Agreement, the following terms have the
following definitions:
(i) "INTELLECTUAL PROPERTY" means any or all of the
following and all rights in, arising out of or associated therewith:
(A) all United States, international and foreign patents and
applications therefor and all reissues, divisions, renewals,
extensions, provisionals, continuations and continuations-in-part
thereof; (B) all inventions (whether patentable or not), invention
disclosures, improvements, trade secrets, proprietary information,
know-how, technology, technical data, supplier lists and customer
lists and all documentation relating to any of the foregoing; (C)
all copyrights, copyright registrations and applications therefor
and all other rights corresponding thereto throughout the world; (D)
all trade names, logos, common law trademarks and service marks,
trademark and service xxxx registrations and applications therefor
and all goodwill associated therewith throughout the world
("TRADEMARKS"); (E) all databases, data collections and content and
all rights therein, throughout the world; (F) all computer software,
including all source code, object code, firmware, development tools,
files, records, data and documentation (including design documents,
flowcharts and specifications therefor), and all media on which any
of the foregoing is recorded; and (G) all domain names, uniform
resource locators and other Internet or similar addresses or
identifiers ("DOMAIN NAMES").
(ii) "COMPANY INTELLECTUAL PROPERTY" shall mean any
Intellectual Property that is owned by any Acquired Company,
including all Company Registered Intellectual Property.
(iii) "REGISTERED INTELLECTUAL PROPERTY" shall mean all United
States, international and foreign: (a) patents; (b) registered
trademarks and registered service marks (including both federal and
state registrations); (c) registered copyrights; and (d) registered
Domain Names.
(b) Schedule 4.10(b) sets forth, as of the date hereof, a true,
correct and complete list of all (i) Registered Intellectual Property owned by
any Acquired Company (the "COMPANY REGISTERED INTELLECTUAL PROPERTY"); (ii)
applications to register any Company Intellectual Property; and (iii)
proceedings or actions before any court, tribunal (including the United States
Patent and Trademark Office and any equivalent authority anywhere in the world)
related to any of the Registered Intellectual Property owned by the Company.
(c) Schedule 4.10(c) sets forth, as of the date hereof, all
material licenses and other agreements pursuant to which any Acquired Company
licenses or otherwise is granted the right to use any Intellectual Property of
any third party used in the conduct of the business of such Acquired Company,
other than "shrink-wrap," "click-through" and similar widely available end-user
licenses.
17
(d) Except as set forth on Schedule 4.10(d), to the Knowledge of
the Company, no Company Intellectual Property infringes or misappropriates the
Intellectual Property of any Person, and no Acquired Company has received
written notice from any Person (i) claiming that the conduct of any Acquired
Company's business infringes or misappropriates the Intellectual Property of any
Person or (ii) challenging the ownership of any of the Company Intellectual
Property except, in each case, as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(e) To the Knowledge of the Company, no Person is infringing or
misappropriating any Company Intellectual Property, except for such
infringements or misappropriations as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(f) To the Knowledge of the Company, no Company Intellectual
Property is subject to any proceeding or outstanding decree, order, judgment or
stipulation that restricts in any manner the use, transfer or licensing thereof
by any Acquired Company or may be reasonably expected to affect the validity,
use or enforceability of such Company Intellectual Property.
(g) Except as set forth on Schedule 4.10(g), to the Knowledge of
the Company, the execution or performance of this Agreement and the consummation
of the transactions contemplated by this Agreement will not alter or impair any
Acquired Company's rights to any Intellectual Property identified on Schedule
4.10(b) or Schedule 4.10(c), except as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
4.11 Agreements, Contracts and Commitments.
(a) Schedule 4.11(a) sets forth, as of the date hereof, a true,
correct and complete list of each and every contract or agreement (whether
written or oral) of a type described below to which any Acquired Company is a
party or by which it or any of its assets is bound (each such contract or
agreement, a "CONTRACT;" and such contracts and agreements, collectively, the
"CONTRACTS"),
(i) each contract and agreement or group of related
agreements which (A) is likely to involve consideration of more than
$250,000 in the aggregate, during the fiscal years ending June 30,
2004 or June 30, 2005, (B) is likely to involve consideration of
more than $250,000 in the aggregate over the remaining term of such
contract, or (C) is likely to involve consideration of more than
$75,000 and cannot be canceled by any Acquired Company without
penalty or further payment and on less than 60 days' notice;
(ii) (A) all employment, consulting, severance or termination
agreements between any Acquired Company and any director, officer or
employee of any Acquired Company providing for annual compensation
in excess of $25,000 (other than any such employment agreement with
a member of the Company's salesforce that is one of the Company's
standard form agreements for
18
its salesforce), and (B) all indemnification agreements between any
Acquired Company and any director, officer or employee of any
Acquired Company;
(iii) all (A) management contracts (excluding contracts for
employment) and (B) contracts with consultants which involve
consideration of more than $100,000;
(iv) all contracts, credit agreements, indentures and other
agreements evidencing indebtedness for borrowed money (including
capitalized leases);
(v) all agreements under which any Acquired Company has
advanced or loaned any funds, other than travel advances and
advances to sales personnel in the ordinary course of business
consistent with past practices or transfers of cash among Acquired
Companies pursuant to their existing cash management policies;
(vi) all guarantees of any obligations in excess of $100,000;
(vii) all joint venture or other similar agreements, other
than joint marketing programs not involving payments by any Acquired
Company in excess of $25,000 per program;
(viii) all lease agreements with annual lease payments in
excess of $50,000;
(ix) agreements under which any Acquired Company has granted
any Person registration rights (including demand and piggy-back
registration rights) or any other similar agreements with respect to
the capital stock of such Acquired Company;
(x) all contracts and agreements that limit the ability of
any Acquired Company to compete in any line of business or with any
Person or entity or in any geographic area or during any period of
time with respect to any business currently conducted by any
Acquired Company;
(xi) all contracts and other agreements with Affiliates of
the Company; and
(xii) any other contracts or agreements that are material to
the business, assets, condition (financial or otherwise) or results
of operations of Acquired Companies taken as a whole.
(b) Except as set forth on Schedule 4.11(b): (i) each Contract is
a valid and binding agreement and is in full force and effect; (ii) no Acquired
Company is in breach, violation or default under, or has received written notice
that it is in breach, violation or default under, any of the terms, provisions
or conditions of any Contract; and (iii) to the Knowledge of the Company, there
are no breaches, violations or defaults by any other Person who is a party to
any Contract. Except as set forth on Schedule 4.11(b), no Contract is subject to
termination,
19
modification or acceleration as a result of the consummation of the transactions
contemplated hereby.
(c) The Company has provided to MHC a true, correct and complete
copy, including all amendments thereto, of each written Contract and a true,
correct and complete written summary of each oral Contract.
4.12 Membership Contracts. Except as set forth on Schedule 4.12, no
Membership Contract provides any Person with any ownership interest in or to any
campground or other Real Property or facility (or portion thereof) owned or used
by any of the Acquired Companies. Each Membership Contract contains all of the
terms and provisions required to be included therein by applicable Law except
where the failure to include any such term or provision would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
Each of the Acquired Companies is in compliance with all of the provisions of
each Membership Contract applicable to it and has satisfied all of its material
obligations thereunder required to be satisfied except, in each case, where the
failure to so comply or satisfy obligations would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect. The reports
attached to Schedule 4.12 accurately present, in all material respects when
considered as a whole, the information purported to be covered thereby. Any
Membership Contract transferred in connection with the Trails Reorganization was
transferred in accordance with applicable Law, except where such failure to
comply with applicable Law would not reasonably be expected to result in a
Material Adverse Effect. As of the Effective Time, the Acquired Companies shall
have validly assigned all of their interest in any Membership Contract to the
Distributed Companies. "MEMBERSHIP CONTRACT" means any membership or similar
agreement entered into between any of the Acquired Companies, the Distributed
Companies or any of their predecessors and any Person entitling such Person to
use, or providing an ownership interest in, any of the Real Property.
4.13 Compliance with Laws. Except as set forth on Schedule 4.13 or except
as would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, (a) each Acquired Company and each Distributed Company
is in compliance with each federal, state, local, municipal, foreign or other
constitution, ordinance, regulation, statute, treaty or other law adopted,
enacted, implemented or promulgated by or under the authority of any
Governmental Entity that is applicable to it or to the conduct or operation of
its business or the ownership or use of any of its assets or properties (each, a
"LAW"); and (b) no Acquired Company or Distributed Company has received any
notice or other written or oral communication from any Governmental Entity
regarding, and no actual or alleged violation of, or failure to comply with, any
Law, or any obligation on the part of any Acquired Company or Distributed
Company to undertake, or to bear all or any portion of the cost of, any remedial
action of any nature exists.
4.14 Litigation. Except for the lawsuits, arbitration proceedings, cases
and matters set forth on Schedule 4.14 or as would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect, there is no
action, suit, arbitration, mediation or other proceeding or investigation of any
nature pending or, to the Knowledge of the Company, threatened against any
Acquired Company or its properties before any court, arbitrator or Governmental
Entity having jurisdiction over any Acquired Company.
20
4.15 Insurance. Schedule 4.15 sets forth a complete and accurate list of
all insurance policies and fidelity bonds covering the assets, business,
equipment, properties, operations, employees, officers and directors of the
Acquired Companies. The Company has provided or made available to MHC true,
correct and complete copies of the insurance policies and fidelity bonds listed
on Schedule 4.15. All premiums due and payable under all such policies and bonds
have been paid and each Acquired Company is otherwise in compliance with the
material terms of such policies and bonds, except where the failure to comply
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect. To the Knowledge of the Company, there has been no
threatened termination of, or premium increase with respect to, any of such
policies. From and after the consummation of the Trails Reorganization, the
Distributed Companies are not insured under the policies and bonds set forth on
Schedule 4.15.
4.16 Environmental Matters. Except as disclosed on Schedule 4.16 or as
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect:
(a) Compliance. Each Acquired Company has complied with all Laws
pertaining to the environment or environmental health and safety. The Acquired
Companies have made available to MHC true and correct copies of all
environmental reports in the possession of any of the Acquired Companies which
relate in whole or in part to any portion of the Real Property or other real
property owned at any time by any of the Acquired Companies which have been
prepared since June 30, 1995.
(b) Hazardous Materials. No Acquired Company has operated any
underground storage tank, nor to the Knowledge of the Company has there been, at
any time, any underground storage tank (or related piping or pumps), at any real
property that any Acquired Company has at any time owned, operated, occupied or
leased ("BUSINESS FACILITIES"). No Hazardous Materials are present as a result
of the actions or omissions of any Acquired Company or any Distributed Company
or, to the Knowledge of the Company, as a result of any actions of any third
party or otherwise, in, on or under any Business Facilities, including the land
and the improvements, ground water and surface water thereof, that could
reasonably be expected to subject any Acquired Company to any liability.
(c) Hazardous Material Activities. No Acquired Company has
transported, stored, used, manufactured, disposed of or released Hazardous
Materials in violation of any Law, nor has any Acquired Company disposed of,
transported, sold or manufactured any product containing a Hazardous Material
(any or all of the foregoing being collectively referred to as "HAZARDOUS
MATERIAL ACTIVITIES") in violation of any rule, regulation, treaty or statute
promulgated by any Governmental Entity in effect prior to or as of the date
hereof to prohibit, regulate or control Hazardous Materials or any Hazardous
Material Activity.
(d) Permits. Each Acquired Company currently holds all
environmental approvals, permits, licenses, clearances and consents (the
"ENVIRONMENTAL PERMITS") necessary for the conduct of its business, including
any Hazardous Material Activities required in the conduct of such business. All
such Environmental Permits are valid and in full force and effect and are listed
on Schedule 4.16. Each Acquired Company has complied with all covenants and
conditions of all such Environmental Permits. To the Knowledge of the Company,
no
21
circumstances exist which could cause any Environmental Permit to be revoked,
modified or rendered non-renewable.
(e) Offsite Hazardous Material Disposal. No action, proceeding,
liability or claim exists against any Acquired Company or, to the Knowledge of
the Company, against any disposal site with respect to any transfer or release
of Hazardous Materials generated by any Acquired Company to or at a disposal
site.
(f) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending against
any Acquired Company or, to the Knowledge of the Company, threatened against any
Acquired Company concerning any Environmental Permit, Hazardous Material or any
Hazardous Materials Activity of any Acquired Company.
(g) Definition of "Hazardous Materials". As used herein,
"HAZARDOUS MATERIALS" shall mean any substance that has been designated by
applicable foreign, federal, state or local Law to be radioactive, toxic,
hazardous or otherwise a danger to health, reproduction or the environment,
including, but not limited to, PCBs, asbestos, petroleum products or any
fraction thereof; urea formaldehyde and any substance listed as a "hazardous
substance," "hazardous waste," "hazardous material" or "toxic substance" or
words of similar import, under any Law, including, but not limited to, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended; the Resource Conservation and Recovery Act of 1976, as amended; the
Federal Water Pollution Control Act, as amended; the Clean Air Act, as amended;
the Superfund Amendment and Reauthorization Act Title III; and the regulations
promulgated pursuant to such laws.
4.17 Brokers' and Finders' Fees. None of the Acquired Companies has
incurred, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with this Agreement
or any transaction contemplated hereby.
4.18 Employee Matters and Benefit Plans.
(a) Certain Definitions. Except as otherwise provided herein, the
capitalized terms set forth below shall have the following meanings ascribed
thereto:
(i) "COBRA" shall mean Title I, Subtitle B, Part 6 of ERISA
and Section 4980B of the Code, as amended;
(ii) "CODE" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder;
(iii) "COMPANY EMPLOYEE PLAN" shall refer to each "employee
benefit plan" within the meaning of Section 3(3) of ERISA and any
other material plan, program, policy, practice, contract, agreement
or other arrangement providing for compensation, severance,
termination pay, performance awards, stock or stock-related awards,
fringe benefits or other employee benefits or remuneration of any
kind, whether formal or informal, funded or unfunded, which is or
has been maintained, contributed to, or required to be contributed
to, by the Company or
22
any ERISA Affiliate for the benefit of any "EMPLOYEE" or beneficiary
or dependent of any Employee, or pursuant to which any Acquired
Company or any ERISA Affiliate has or may have any liability,
contingent or otherwise;
(iv) "DOL" shall mean the Department of Labor;
(v) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended and the rules and regulations
promulgated thereunder;
(vi) "EMPLOYEE" shall mean any current, former or retired
employee or director of any Acquired Company;
(vii) "EMPLOYEE AGREEMENT" shall refer to each management,
employment, stock purchase, severance, separation, collective
bargaining, relocation, loan, repatriation, expatriation, visa, work
permit or similar agreement, contract or arrangement, between the
Company or any other Acquired Company, or any ERISA Affiliate
thereof, and any Employee of any Acquired Company, or group of such
Employees;
(viii) "ERISA AFFILIATE" shall mean any Person under common
control with the Company within the meaning of Section 414(b), (c),
(m) or (o) of the Code and the regulations thereunder or Section
4001(b) of ERISA and the regulations thereunder;
(ix) "IRS" shall mean the Internal Revenue Service;
(x) "MULTIEMPLOYER PLAN" shall mean any Company Employee
Plan which is a "multiemployer plan" as defined in Section 3(37) of
ERISA; and
(xi) "PENSION PLAN" shall refer to each Company Employee Plan
which is an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA.
(b) Company Employee Plans; Employee Agreements. Schedule 4.18(b)
lists, as of the date hereof, (i) each Company Employee Plan and (ii) each
Employee Agreement with any Employee if such Employee Agreement may require an
Acquired Company to pay total consideration to any Employee greater than
$250,000. Except as set forth on Schedule 4.18(b), neither the Acquired
Companies nor the Distributed Companies have any plan, commitment or intention
to establish any new Company Employee Plan or Employee Agreement, to modify or
terminate any Company Employee Plan or Employee Agreement (except to the extent
required by Law or to conform any such Company Employee Plan or Employee
Agreement to the requirements of any applicable Law, in each case as previously
disclosed to MHC in writing, or as required by this Agreement), or to enter into
any Company Employee Plan or Employee Agreement, in each case, that would result
in any liability for any Acquired Company or MHC.
(c) Employee Plan Compliance. Except as set forth on Schedule
4.18(c) or as would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, (i) each Acquired Company and each
Distributed Company has performed all obligations
23
required to be performed by it under each Company Employee Plan, and each
Company Employee Plan has been established and maintained in accordance with its
terms and in compliance with all applicable Laws, statutes, orders, rules and
regulations, including, but not limited to, ERISA and the Code; (ii) no
"prohibited transaction," within the meaning of Section 4975 of the Code or
Sections 406 or 407 of ERISA has occurred with respect to any Company Employee
Plan that would result in any liability for any Acquired Company or MHC; (iii)
there are no actions, suits or claims pending, or, to the Knowledge of the
Company, threatened or reasonably anticipated (other than routine claims for
benefits) against any Company Employee Plan or against the assets of any Company
Employee Plan that could result in any liability for any Acquired Company or
MHC; (iv) each Company Employee Plan can be amended, terminated or otherwise
discontinued after the Effective Time in accordance with its terms, without
liability to the Acquired Companies or MHC (other than ordinary benefits and
administration expenses incurred prior to, or typically incurred in, a
termination event); (v) there are no inquiries or proceedings pending or, to the
Knowledge of the Company, threatened by any Governmental Entity, including, but
not limited to, the IRS or DOL with respect to any Company Employee Plan; (vi)
neither any Acquired Company nor any Distributed Company, nor any ERISA
Affiliate thereof, is subject to any penalty or tax with respect to any Company
Employee Plan under Section 502(l) of ERISA or Sections 4975 through and
including 4980G of the Code that would result in any liability for the Acquired
Companies, the Distributed Companies, MHC or any of their ERISA Affiliates; and
(vii) each Company Employee Plan intended to qualify under Section 401(a) of the
Code and each trust intended to qualify under Section 501(a) of the Code has
either received a favorable determination letter with respect to each such
Company Employee Plan from the IRS (and to the Knowledge of the Company, there
exists no fact which would cause such determination letter to be unreliable) or
has remaining a period of time under applicable Treasury regulations or IRS
pronouncements in which to apply for such a determination letter and make any
amendments necessary to obtain a favorable determination letter.
(d) Pension Plans. Except as disclosed on Schedule 4.18(d), none
of the Acquired Companies or the Distributed Companies, nor any ERISA Affiliate
thereof, has ever maintained, established, sponsored, participated in,
contributed to, or had any liability (contingent or otherwise) with respect to
any Pension Plan which is subject to Part 3 of Subtitle E of Title I of ERISA,
Title IV of ERISA or Section 412 of the Code (including without limitation any
Multiemployer Plan).
(e) No Post-Employment Obligations. Except as set forth on
Schedule 4.18(e), no Company Employee Plan provides, or has any liability to
provide, life insurance, medical or other welfare benefits to any Employee of
any Acquired Company, any Distributed Company or any ERISA Affiliate thereof
upon his or her retirement or termination of employment for any reason that
would result in any liability for any Acquired Company or MHC, except as may be
required by COBRA or similar state statute, and no Acquired Company or
Distributed Company has ever represented, promised or contracted (whether in
oral or written form) to or with any Person or Persons that any such Employee(s)
would be provided with life insurance, medical or other welfare benefits upon
their retirement or termination of employment that would result in any liability
for any Acquired Company or MHC, except to the extent required by COBRA or
similar state statute.
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(f) Effect of Transaction.
(i) Except as expressly contemplated herein or as set forth
on Schedule 4.18(f)(i) or as would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect,
the execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an
event under any Company Employee Plan, Employee Agreement, or
related trust or loan that will result in any liability to any
Acquired Company or MHC.
(ii) Except as set forth on Schedule 4.18(f)(ii), no payment
or benefit which will or may be made by any Acquired Company or its
Affiliates with respect to any Employee as a result of the
transactions contemplated by this Agreement or otherwise may be
characterized as "parachute payments" within the meaning of Section
280G(b)(2) of the Code. For each payment or benefit set forth on
Schedule 4.18(f)(ii), Schedule 4.18(f)(ii) specifies the date the
payment is to be paid or the date the benefit is to be provided, the
amount of the payment or the value of the benefit, and whether or
not the recipient of the payment or benefit is entitled to any
additional compensation if the payment or benefit set forth on
Schedule 4.18(f)(ii) is an "excess parachute payment" within the
meaning of Section 280G(b)(1) of the Code. Unless otherwise noted,
the value of each payment or benefit set forth on Schedule
4.18(f)(ii) is fully deductible by the payor and not subject to the
deduction penalties set forth in Section 280G of the Code.
(g) Employment Matters. As of the date hereof, the Acquired
Companies are in compliance with all applicable Laws (including, but not limited
to, the Fair Labor Standards Act, the Workers Adjustment and Retraining
Notification Act, and Section 274A of the Immigration and Naturalization Act)
respecting employment, employment practices, terms and conditions of employment
and wages and hours, in each case, with respect to Employees except, in each
case, as would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(h) Labor. No work stoppage or labor strike against any Acquired
Company is pending or, to the Knowledge of the Company, threatened. Except as
set forth on Schedule 4.18(h), no Acquired Company is involved in or, to the
Knowledge of the Company, threatened with any labor dispute, grievance or
litigation relating to labor, safety or discrimination matters involving any
Employee, including, but not limited to, charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would, individually
or in the aggregate, result in a Material Adverse Effect. To the Knowledge of
the Company, no Acquired Company has engaged in any unfair labor practices
within the meaning of the National Labor Relations Act which would, individually
or in the aggregate, directly or indirectly reasonably be expected to result in
a Material Adverse Effect. Except as set forth on Schedule 4.18(h), no Acquired
Company is a party to, or bound by, any collective bargaining agreement or union
contract with respect to Employees and no collective bargaining agreement is
being negotiated by or for any Acquired Company.
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(i) Transferred Benefits. As of the Effective Time, the Acquired
Companies have no liability with respect to any Transferred Benefits.
4.19 Employees. As of the Effective Time, none of the Acquired Companies
shall have any employees or any obligations for compensation or other employee
benefits whatsoever to any former employees of any Person, including any of the
Acquired Companies, the Distributed Companies or any of their predecessors.
4.20 Governmental Authorizations and Licenses. As of the Effective Time,
Operations or its subsidiaries will possess all consents, licenses, permits,
grants or other authorizations required for (a) the operation of the Operating
Business as conducted by the Acquired Companies as of the date hereof or (b) the
holding of an ownership interest in the Operating Business (collectively, the
"OPERATIONS AUTHORIZATIONS"), other than those Operations Authorizations, that
the failure to possess would not have or reasonably be expected to have a
Material Adverse Effect. The Operations Authorizations set forth on Schedule
4.20(a) constitute all the material authorizations, consents, licenses, permits
and grants required to permit Operations to operate or conduct the Operating
Business as conducted by the Acquired Companies as of the date hereof or hold
any interest in its properties or assets. The Operations Authorizations set
forth on Schedule 4.20(a) are in full force and effect and are not subject to
termination by reason of the Merger. As of the Effective Time and except as
would not have or reasonably be expected to have a Material Adverse Effect, (x)
all conditional use permits required for the operation of the Real Property and
for the existence and operation of membership campgrounds on the Real Property
("CONDITIONAL USE PERMITS") shall be in full force and effect and shall be held
by the applicable Acquired Company, (y) all appropriate disclosure statements
("DISCLOSURE STATEMENTS") relating to the Membership Contracts required for
Operations to conduct the Operating Business after the Effective Time shall have
been recorded, registered or filed by Operations with the appropriate
Governmental Entities, and (z) Operations shall have caused the Ground Lease to
have been registered with and approved by the appropriate Governmental Entities.
4.21 Related Party Transactions. Other than (i) transactions, licenses
and agreements contemplated by this Agreement and (ii) the Contracts set forth
on Schedule 4.21, there are no transactions or agreements (whether written or
oral) between any of the Acquired Companies, on the one hand, and any of the
Distributed Companies, on the other hand, that require the fulfillment of any
obligations, liabilities or payments by any of the Acquired Companies on or
after the Closing Date.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF MHC AND ACQUISITION
As of the date hereof, MHC and Acquisition jointly and severally represent
and warrant to the Company and Operations as follows:
5.1 Organization, Standing and Power. MHC is a real estate investment
trust duly organized, validly existing and in good standing under the laws of
the State of Maryland, and Acquisition is a corporation duly organized, validly
existing and in good standing under the laws
26
of the State of Delaware. Each of MHC and Acquisition has the corporate power to
own its properties and to carry on its business as now being conducted. Each of
MHC and Acquisition is duly qualified to do business and is in good standing as
a foreign corporation or organization in each jurisdiction in which the failure
to be so qualified would have or would reasonably be expected to have a material
adverse effect.
5.2 Authority. Each of MHC and Acquisition has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of MHC and Acquisition.
This Agreement has been duly executed and delivered by MHC and Acquisition and
constitutes the valid and binding obligation of MHC and Acquisition, enforceable
in accordance with its terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally and (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies. The execution and delivery of this Agreement by MHC and
Acquisition do not, and the consummation of the transactions contemplated hereby
will not, constitute a Conflict with (i) any provision of the Certificate of
Incorporation or By-Laws of MHC or Acquisition, (ii) any contract to which MHC
or Acquisition is a party or by which any of its respective properties or assets
is bound, or (iii) any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to MHC or Acquisition or their properties or assets. No
consent, waiver, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity or any third party (so as
not to trigger any Conflict) is required by or with respect to MHC or
Acquisition in connection with MHC's or Acquisition's execution and delivery of
this Agreement, or its consummation of the transactions contemplated hereby,
except (i) the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware, and (ii) compliance with the HSR Act.
5.3 Ownership of MHC and Acquisition; No Prior Activities. Each of MHC
and Acquisition was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement. Neither MHC nor Acquisition (i) has
conducted or will, prior to the Effective Time, conduct any business and (ii)
has any or will, prior to the Effective Time, have any assets or liabilities,
except, in either case, in connection with the transactions contemplated by this
Agreement. As of the date hereof, the authorized capital stock of Acquisition
consists of 100 shares of common stock, par value $0.01 per share, all of which
have been validly issued, are fully paid and nonassessable and are owned by MHC
free and clear of any Liens.
5.4 Brokers' and Finders' Fees. Neither MHC nor Acquisition has
incurred, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with this Agreement
or any transaction contemplated hereby.
5.5 Litigation. There is no legal proceeding pending or, to the
knowledge of MHC or Acquisition, threatened against MHC or Acquisition, other
than those which would not reasonably be expected to have a material adverse
effect on any of the Stockholders.
5.6 Financing. As of the Effective Time, MHC will have cash in an
aggregate amount sufficient to pay the amounts required to be paid by it, the
Surviving Corporation or
27
Acquisition pursuant to this Agreement and all contemplated fees and expenses
related to the transactions contemplated by this Agreement to be paid by MHC,
Acquisition or the Surviving Corporation; and MHC will use or make such cash
available to Acquisition and the Surviving Corporation to allow them to fulfill
all such obligations.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Indebtedness Certificate. Two business days prior to the Closing
Date, the Company shall deliver to MHC a certificate (the "INDEBTEDNESS
CERTIFICATE") which will be attached to, and become a part of, this Agreement
setting forth (i) all outstanding Indebtedness of the Acquired Companies as of
the Closing Date and, with respect to any Indebtedness owed to a financial
institution, a pay-off letter confirming the pay-off amount of such Indebtedness
as of the Closing Date, and (ii) the Note Purchase Price. Each of the Company
and Operations represents, warrants and covenants that the information provided
in the Indebtedness Certificate shall be true, accurate and complete.
6.2 Expenses. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger, including, but not limited to,
all legal, accounting, financial advisory, consulting and all other fees and
expenses of third parties incurred by a Party in connection with the negotiation
and effectuation of the terms and conditions of this Agreement and the
transactions contemplated hereby shall be the obligation of the respective Party
incurring such fees and expenses; provided, however that the Company and
Operations, on the one hand, and MHC and Acquisition, on the other hand, shall
share equally the costs related to preparation of surveys of the campground
properties containing the Excess Land.
6.3 Public Disclosures. MHC, on the one hand, and the Trails Parties, on
the other hand, shall mutually agree to the text of both of the press releases
announcing the signing of this Agreement to be issued, respectively, by MHC and
the Company (the "INITIAL PRESS RELEASES"), and shall mutually agree upon the
time and manner in which the Initial Press Releases shall be issued. Prior to
the issuance of the Initial Press Releases, except as otherwise may be required
by applicable Law, no Party shall (i) make any public statement or announcement
relating to such Party's activities in connection with this Agreement, or (ii)
communicate any information relating to such Party's activities in connection
with this Agreement to any member of the news media if that Party knows or has
reason to know that all or any portion of that information is likely to be made
publicly available before the issuance of the Initial Press Releases. After the
issuance of the Initial Press Releases and prior to the Closing, MHC and the
Company shall consult with each other before issuing any other press release or
otherwise making any public statement with respect to this Agreement or the
Merger or the transactions contemplated hereby or thereby (other than
information previously disclosed or announced to the public in accordance with
the terms hereof) and shall not issue any such press release or make any such
public statement prior to such consultation, except as may be required by
applicable Law.
6.4 HSR and Other Regulatory Filings. As soon as reasonably practicable,
MHC and the Company each shall file with the United States Federal Trade
Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice (the "DOJ") Notification and
28
Report Forms relating to the transactions contemplated herein if required by the
HSR Act, as well as comparable pre-merger notification forms required by the
merger notification or control laws and regulations of any other applicable
jurisdiction, as agreed to by the Parties. MHC and the Company each shall
promptly (a) supply the other with any information which may be required in
order to effectuate such filings and (b) supply any additional information which
reasonably may be required by the FTC, the DOJ or the competition or merger
control authorities of any other jurisdiction and which the Parties may
reasonably deem appropriate.
6.5 Certain Tax Matters.
(a) MHC Actions. MHC agrees that the Notes will not be repaid
other than with cash from assets or continuing, separate operations of the
Company, from loans against the Company's assets or in connection with a
refinancing of the Notes. The Company agrees that to the extent MHC satisfies
the covenant contained in this Section 6.5(a), as of the Effective Time, the
aggregate "earnings and profits" (within the meaning of, and calculated in
accordance with, the Code) of the Acquired Companies shall not be in excess of
the Residual Amount. For purposes of this Agreement, "RESIDUAL AMOUNT" shall
mean: (i) $10,000,000 if, on or prior to August 18, 2004, the Company shall have
received (A) evidence reasonably satisfactory to the Company from an
institutional lender providing for aggregate net indebtedness for borrowed money
by the Surviving Corporation and its subsidiaries (after giving effect to the
Trails Reorganization) from such institutional lender in an aggregate amount of
at least $120,000,000 and which does not assume that any contributions will be
made, or credit support given, by MHC or any of its Affiliates to the Surviving
Corporation or its subsidiaries; and (B) an appraisal reasonably satisfactory to
the Company evidencing an appraised value of Operations and its subsidiaries
(after giving effect to the Trails Reorganization) of at least $25,000,000; or
(ii) such amount as is mutually agreed upon by the Parties.
(b) Pre-Closing Cooperation. Until the Closing Date, if any
Acquired Company receives any written notice from any taxing authority relating
to an audit (whether pending or threatened) of any Tax Return filed by an
Acquired Company or proposing an adjustment to any Tax payable by an Acquired
Company, the Company shall give prompt written notice thereof to MHC, which
notice shall describe in detail the audit or proposed adjustment.
(c) Tax Cooperation. The Parties shall each: (i) reasonably
cooperate in the preparation of any Tax Returns which the other is responsible
for preparing and filing; (ii) reasonably cooperate in preparing for any audits
of, or disputes with taxing authorities regarding, any Taxes relating to any of
the Acquired Companies or Distributed Companies; (iii) make available to the
other and any taxing authority, as reasonably requested, all information,
records and documents with respect to Taxes relating to any of the Acquired
Companies or Distributed Companies for taxable periods (and portions thereof)
that end on or before the Closing Date ("PRE-CLOSING TAXABLE PERIODS"); (iv)
provide prompt notice to the other in writing of any pending or threatened
audits or assessments with respect to Taxes relating to any of the Acquired
Companies for Pre-Closing Taxable Periods; and (v) promptly furnish the other
with copies of all correspondence received from any taxing authority in
connection with any audit or information request with respect to Taxes relating
to any of the Acquired Companies for Pre-Closing Taxable Periods.
29
(d) Tax Returns.
(i) Except as otherwise provided in Section 6.5(d)(ii)
hereof, MHC shall prepare and file, or shall cause the applicable
Acquired Company to prepare and file, all Tax Returns required to be
filed after the Closing Date by or with respect to any Acquired
Company.
(ii) Operations shall prepare or cause to be prepared (i) all
federal, state, local and foreign Tax Returns required to be filed
by the Acquired Companies after the Closing Date (including any
consolidated, combined or unitary Tax Returns which include both
Acquired Companies and Distributed Companies) with respect to any
taxable period ending on or before the Closing Date (the
"PRE-CLOSING RETURNS") and (ii) all federal, state, local and
foreign income Tax Returns required to be filed by the Acquired
Companies with respect to a taxable period (a "STRADDLE PERIOD")
commencing prior to the Closing Date and ending after the Closing
Date (an "INCOME TAX STRADDLE PERIOD RETURN", and together with the
"PRE-CLOSING RETURNS", the "OPERATIONS RETURNS"). To the extent
permitted by applicable Law, Operations and MHC shall elect to treat
the Closing Date as the last day of any taxable period applicable to
the Acquired Companies. The Operations Returns shall be prepared
substantially in accordance with applicable Law and the custom and
past practices of the Acquired Companies in preparing their Tax
Returns. MHC shall provide Operations with access to the Acquired
Companies' books and records and personnel and accountants for the
purpose of preparing the Operations Returns and otherwise cooperate
with Operations in the preparation thereof. Operations shall submit
each Operations Return to MHC at least 20 days prior to the due date
thereof (taking into account all extensions properly obtained, which
extensions shall be obtained by MHC at the request of Operations)
for its review and approval, which approval shall not be
unreasonably withheld. MHC shall timely file each Operations Return
received from Operations and pay the Tax shown thereon. Operations
covenants to provide funds to MHC on a timely basis as provided in
Section 6.5(i) hereof.
(iii) MHC shall prepare or cause to be prepared all federal,
state, local and foreign Tax Returns, other than income Tax Returns,
required to be filed by the Acquired Companies with respect to the
Straddle Period (a "NON-INCOME TAX STRADDLE PERIOD RETURN") and,
together with the Operations Returns and all other Straddle Period
Returns, the "POST-CLOSING RETURNS"). The Non-Income Tax Straddle
Period Returns shall be prepared substantially in accordance with
applicable Law and the custom and past practices of the Acquired
Companies in preparing their Tax Returns. MHC shall deliver to
Operations at least 20 days prior to the due date thereof (taking
into account all extensions properly obtained) each Non-Income Tax
Straddle Period Return for its review and approval, which approval
shall not be unreasonably withheld. MHC shall timely file each
Straddle Period Return and pay the Tax shown thereon. Operations
covenants to provide funds to MHC on a timely basis as provided in
Section 6.5(i) hereof.
30
(iv) If the taxable income, or the liability for Taxes, of an
Acquired Company for any Straddle Period needs to be allocated for
any reason under this Agreement to the portion of the Straddle
Period ending on the Closing Date, such allocation shall be made by
closing the books of the Acquired Company as of the close of
business on the Closing Date. Notwithstanding the foregoing
sentence, in the case of (x) franchise taxes based on
capitalization, debt or shares of stock authorized, issued or
outstanding, or (y) ad valorem Taxes, the portion of such Taxes
attributable to the portion of the Straddle Period that ends on the
Closing Date shall be the amount of such Taxes for the entire
Straddle Period, multiplied by a fraction, the numerator of which is
the number of days in the portion of the Straddle Period ending on
the Closing Date and the denominator of which is the entire number
of days in the Straddle Period.
(e) Amended Tax Returns. Neither MHC nor any Acquired Company will
amend any Tax Returns of any Acquired Company for any period ending on or prior
to the Closing Date without the prior written consent of Operations, which
consent shall not be unreasonably withheld.
(f) Tax Sharing Agreement. Any Tax Sharing Agreement that may
exist between any of the Acquired Companies, on the one hand, and any of the
Distributed Companies, on the other hand, and all obligations and rights
thereunder, shall terminate as of the Closing and have no further effect for any
taxable year (whether the current year, a future year or a past year), and the
Acquired Companies and the Distributed Companies, as the case may be, shall
cease to have any liability to make or rights to receive any payments thereunder
for any amounts due in respect of periods ending prior to or on or after the
Closing Date.
(g) Purchase Price Allocation. For all Tax purposes, the Parties
shall allocate all of the consideration to be paid pursuant to Article III
hereof to the Company Common Stock and not to any other agreements or
obligations. Any payments made under Article VIII hereof shall be treated for
all Tax purposes as an adjustment to the purchase price for the Company Common
Stock.
(h) Audits. The Parties shall endeavor to agree which Party (the
"CONTROLLING PARTY") would bear the principal liability under this Agreement for
any Taxes that could arise in connection with any Tax audit or administrative or
judicial proceeding (a "TAX CONTROVERSY"). The Controlling Party shall have the
right, at its sole cost and expense to represent the interests of the Acquired
Companies and Distributed Companies in such Tax Controversy, provided that the
Controlling Party shall not settle any claim for Taxes which could have an
adverse impact on the other Party (the "NON-CONTROLLING PARTY") without the
prior written consent of the Non-Controlling Party, which consent shall not be
unreasonably withheld, and further provided that, if Operations is the
Controlling Party, no Acquired Company shall be required to pay any Taxes that
must be paid as a precondition to the initiation of any such Tax Controversy
unless Operations advances the necessary funds for the payment of such Taxes to
MHC. Notwithstanding the fact that the Parties have agreed that Operations
should be the Controlling Party with respect to a Tax Controversy, Operations
may elect not to represent the interests of the Acquired Companies in such Tax
Controversy in which case MHC shall then become the Controlling Party for such
Tax Controversy. The Controlling Party shall not settle any claim for
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Taxes for which the Non-Controlling Party would be liable without the prior
written consent of the Non-Controlling Party, which consent shall not be
unreasonably withheld, and the Non-Controlling Party shall reimburse the
Controlling Party for any reasonable costs, fees or expenses incurred in
connection with the portion of such Tax Controversy related to Taxes that would
be borne by the Non-Controlling Party. In any Tax Controversy that may result in
a liability for Taxes of the Non-Controlling Party, the Controlling Party shall
keep the Non-Controlling Party informed of all activities in connection with the
Tax Controversy and shall promptly deliver to the Non-Controlling Party copies
of all correspondence sent and received in connection with the Tax Controversy
and shall respond reasonably to all suggestions from the Non-Controlling Party
with respect to the Tax Controversy. This Section 6.5(h), and not Section 8.4
hereof, shall be controlling in cases where (but for this sentence) both
sections would apply but the remaining provisions of Article VIII shall continue
to apply to any such claim for indemnification.
(i) Tax Indemnity.
(i) Subject to the limitations set forth in Section
8.2 hereof, Operations hereby indemnifies MHC and each of its
Affiliates (including, effective upon the Closing, each of the
Acquired Companies) against and agrees to hold each of them
harmless from any (u) Tax of an Acquired Company related to a
Pre-Closing Taxable Period or to the portion of a Straddle
Period ending on the Closing Date, (v) liability for gain on
the sale of Windsor campground and waterslide, (w) liability
for the payment of any amount as a result of any Acquired
Company having been prior to the Closing a party to or
obligated under any Tax sharing, Tax allocation or Tax
indemnity agreement or arrangement, (x) liability for Taxes of
an Acquired Company resulting from the Trails Reorganization,
(y) liability for Taxes of MHC or any Tax Affiliate resulting
from a breach of the representation or covenant made by the
Company in Section 6.5(a) hereof (including, for the avoidance
of doubt, any Taxes, interest or penalties that may be imposed
on MHC or Manufactured Home Communities, Inc. ("MHC INC.") as
a result of any actual or deemed dividend required to be paid
by reason of such breach), (z) liabilities, costs, expenses
(including, but not limited to, reasonable expenses of
investigation and attorneys' fees and expenses), losses,
damages, assessments, settlements or judgments arising out of
or incident to the imposition, assessment or assertion of any
Tax described in the foregoing clauses (u), (v), (w), (x) or
(y) (the sum of the amounts described in clauses (u), (v),
(w), (x), (y), and (z) being referred to herein as a "TAX
LOSS"). "TAX AFFILIATE" means each of MHC, MHC Inc., MHC
Trust, MHC Operating Limited Partnership, and any successor in
interest of any of the foregoing.
(ii) For purposes of this Section 6.5(i), in the case
of any Taxes that are payable for a Straddle Period, the
portion of such Tax related to the portion of such Straddle
Period ending on the Closing Date shall be determined in
accordance with Section 6.5(d)(iv) hereof.
(iii) Operations shall make payment under this Section
6.5(i) to MHC or any other Person designated by MHC within 30
days after MHC provides written notice to Operations stating
that a Tax Loss has been incurred and the
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amount thereof. To the extent Operations is liable under
Treasury Regulation 1.1504-6 (or any corresponding provision
of state, local or foreign income Tax law) for any Tax giving
rise to a payment obligation under this Section 6.5(i) and to
the extent Operations makes a payment under this Section
6.5(i) with respect to such Tax, MHC covenants that it will
pay the amount of such Tax to the relevant governmental
authority and agrees to indemnify and hold harmless Operations
for any liability it may have with respect of such Tax.
(iv) Tax Refunds. Operations shall be entitled to all
refunds of Taxes of any Acquired Company, and any amounts
credited against Taxes to which any Acquired Company becomes
entitled, to the extent such refunds or credits relate to any
Pre-Closing Taxable Period.
(v) Limitations on Tax Indemnity. The amount of any
Tax Loss shall be reduced (i) to take into account any net Tax
refund, Tax credit or reduction in Taxes actually and
currently realized as a result of the recognition of the Tax
Loss, and (ii) to take into account any payment actually
received by MHC with respect to a Tax Loss.
(vi) MHC agrees that, in the event of a breach of the
representation made by the Company in Section 6.5(a) hereof,
(i) MHC will use its best efforts to make a distribution of
any non-REIT earnings and profits in accordance with Treasury
Regulations 1.857-11(c) and Section 852(e) of the Code, to the
extent such provisions are available and would reduce the
Taxes or other Losses that MHC or any Affiliate of MHC
otherwise would owe or incur as a result of such breach, and
(ii) each Affiliate of MHC will use its best efforts to make a
distribution of its share of income attributable to any
distribution described in clause (i) of this subsection that
it receives (directly or indirectly) from MHC, to the extent
such a distribution would reduce the Taxes or other Losses
that such Affiliate otherwise would owe or incur as a result
of such breach.
6.6 Transfer of Certain Employee Benefits.
(a) Prior to the Merger, the Company shall transfer and assign to
Operations, and Operations shall assume from the Company, all rights and
obligations under any Company Employee Plan and Employee Agreement that is
sponsored, maintained or otherwise provided by any of the Acquired Companies or
to which any of the Acquired Companies may have any liability, including,
without limitation, any retiree health obligations and all other health, dental,
long term disability, short term disability, life, supplemental life, accidental
death and dismemberment, and business travel accident insurance plans or
arrangements (with all such rights and obligations previously described in this
Section 6.6(a) collectively referred to as the "TRANSFERRED BENEFITS"). With
respect to each Transferred Benefit, the Acquired Companies shall transfer and
assign to Operations and Operations shall assume prior to the Effective Time any
insurance policies and service agreements that are held for or entered into in
connection with the Transferred Benefits and any assets of any Company Employee
Plan constituting a part of any of the Transferred Benefits. The Company shall
obtain all consents required from, and provide any required notices to, any
third parties (e.g., insurers, the Pension Benefit Guaranty
33
Corporation or third party administrators), participants or beneficiaries in
connection with the transfer and assignment of the Transferred Benefits and the
associated insurance policies and services agreements.
(b) The Company's transfer and assignment, and Operations'
assumption, of all Transferred Benefits and any insurance policies and service
agreements related thereto shall comply with the Health Insurance Portability
and Accountability Act of 1996, as amended, and all other applicable Laws and
regulations.
6.7 Conduct of the Business. The Company covenants and agrees that
during the period from the date of this Agreement to the Effective Time (unless
the Parties shall otherwise agree in writing and except as otherwise
contemplated by this Agreement), other than as necessary to effect the Trails
Reorganization or the sale of Windsor campground and waterslide, it will, and
will cause each of its subsidiaries to, in all material respects (i) conduct its
operations in the ordinary course of business, with no less diligence and effort
than would be applied in the absence of this Agreement, (ii) use commercially
reasonable efforts to keep available the service of its current officers and
employees and preserve its relationships with customers, suppliers and others
having business dealings with it, and (iii) timely file all Tax returns in
accordance with past practices and proceedings; provided, however, that none of
the following shall in themselves (either alone or in combination) constitute a
failure to comply with the foregoing provisions of this Section 6.7, and none of
the following shall be taken into account in determining whether the Company has
failed to comply with the foregoing provisions of this Section 6.7: (A) any
change, effect or circumstance that arises by reason of a deterioration in the
financial markets, the economy or the industries in which the Company and its
subsidiaries operate (whether in the United States, Canada or any foreign
country in which they operate), (B) any change, effect or circumstance that is
attributable to the disclosure of the fact that MHC is the prospective acquiror
of the Company or the announcement or pendency of the transactions contemplated
hereby; (C) any change, effect or circumstance that directly arises out of any
action taken by MHC or any of its Affiliates; (D) any mandatory change, effect
or circumstance arising from any change in accounting requirements or principles
or any change in applicable Laws; (E) any change, effect or circumstance arising
from compliance with the terms of, or the taking of any action required by, this
Agreement; or (F) any change, effect or circumstance attributable to any acts of
war involving the United States or, hostilities or terrorist activity involving
the United States, including without limitation any continuation or material
worsening of hostilities involving the combat of terrorism or other national
security issues involving the United States.
6.8 Supplements to Schedules. From time to time prior to the Closing
Date, the Company shall amend or supplement any of the Schedules to this
Agreement with respect to any matter that comes to its attention that arises
after the date of this Agreement (but not with respect to any matter coming into
existence or occurring at or prior to the date hereof) that, if existing or
occurring at or prior to the date of this Agreement, would have been required to
be set forth or described in such a schedule or that is necessary to supplement,
update, complete or correct any information in any representation or warranty
contained in Article IV hereof. In determining whether the condition set forth
in Section 7.2(a) hereof is satisfied, no such supplemental disclosures shall be
given effect; for purposes of Articles IV and VIII hereof, any such supplemental
disclosure shall be given effect.
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6.9 Trails Reorganization. Prior to the Effective Time, the Company
shall consummate the Trails Reorganization in accordance with the provisions of
the Reorganization Documents.
6.10 Additional Obligations. At the Closing, the Note Purchaser shall
purchase the Notes from the Stockholders for the aggregate Note Purchase Price
in accordance with the provisions of the Note Purchase Agreement. The Parties
hereby agree that after the Closing, the Note Purchaser may secure the Notes
with the stock or assets of MHC or any of its subsidiaries or with any other
appropriate collateral. Each of MHC and the Company covenant and agree to
utilize the provisions of the iStar Amendment to pay off the iStar Debt and to
obtain releases of any liens securing such iStar Debt in order to consummate the
Merger and the transactions contemplated thereby.
6.11 Schedules to this Agreement. The Parties acknowledge that the
schedules (the "SCHEDULES") and exhibits A and B and a form of exhibit C (the
"EXHIBITS") to this Agreement have not been attached to this Agreement as of the
date hereof. The Parties covenant and agree to use good faith, commercially
reasonable efforts to prepare and attach to this Agreement within fourteen (14)
days of the date hereof such Schedules and Exhibits in form and substance
mutually agreeable to the Parties.
6.12 E&P Transactions. The Company covenants to undertake commercially
reasonable transactions prior to the Effective Time to cause earnings and
profits of the Acquired Companies as of the Effective Time to be an amount that
does not exceed the Residual Amount (the "E&P TRANSACTIONS") and such E&P
Transactions shall be subject to the reasonable approval of MHC and Acquisition
acting in good faith.
6.13 Release of Leisure Time Escrow. The Company covenants that it shall
pay off the entire balance (including accrued interest thereon) of the
promissory note held by Xxxxxx Xxxxxxxxx pursuant to that certain Settlement
Agreement, dated April 23, 1997, between Leisure Time Resorts of America, Inc.
("LEISURE TIME"), as successor by merger to Xxxxxxxxx Investment Corporation,
and Xxxxxx Xxxxxxxxx and take all other actions necessary to release the shares
of Leisure Time purchased by Leisure Time pursuant to the Settlement Agreement
from escrow so that as of the Effective Time Thousand Trails will own all of the
outstanding capital stock of Leisure Time.
6.14 Working Capital Facility. Each of the Company and Operations
covenant and agree to use commercially reasonable good faith efforts to cause
Operations, prior to the Closing, to (a) enter into a working capital loan
facility (the "REPLACEMENT FACILITY") with terms substantially similar to the
current working capital credit facility between Union Bank of California and
Thousand Trails (the "EXISTING CREDIT FACILITY") and (b) terminate the Existing
Credit Facility and obtain all necessary releases thereunder. In the event that
the Company and Operations are unable to obtain a Replacement Facility, MHC
shall use commercially reasonable good faith efforts to obtain a Replacement
Facility for Operations from a third party lender or MHC (or one of its
Affiliates) shall provide a Replacement Facility on terms mutually agreed to by
the Company, Operations and MHC (or the MHC Affiliate providing such Replacement
Facility).
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6.15 Joint Venture Agreement. The Parties acknowledge that MHC shall have
the right to use the Excess Land to offer non-membership products; provided,
however, that if MHC uses the Excess Land for park model or recreational vehicle
resort purposes Operations shall have the right to participate with MHC as a
joint venturer and/or receive industry-standard management fees in connection
with such use pursuant to the agreement described in the next sentence. The
Parties covenant and agree to use commercially reasonable efforts to prepare a
form of joint venture/management fee agreement with terms mutually agreeable to
the Parties to be attached to this Agreement as Exhibit D within twenty-one (21)
days of the date hereof (the "JOINT VENTURE AGREEMENT"), which Joint Venture
Agreement shall be executed by the Parties in the event that MHC intends to use
the Excess Land for park model or recreational vehicle resort purposes.
6.16 Exclusivity. From the date hereof through the earlier of (i) the
Closing or (ii) the termination of this Agreement in accordance with the terms
hereof, the Company and Operations shall not and shall cause all of their
employees, agents, subsidiaries and affiliates (the "KTTI PARTIES") not to,
directly or indirectly, through any representative or otherwise, solicit or
entertain offers from, negotiate with or in any manner encourage, discuss,
accept, or consider any proposal of any other Person relating to the acquisition
of the stock of or interests in the Company, the Company's assets or business
(including, the Properties (as defined in the Ground Lease)), in whole or in
part, whether directly or indirectly, through purchase, merger, consolidation,
or otherwise, and the Company and Operations shall immediately notify MHC
regarding any contact between the Company or Operations or their respective
representatives and any other Person regarding any such offer or proposal or any
related inquiry. The Company and Operations covenant that if either of the KTTI
Parties breach this exclusivity covenant, or within six months of the
termination of this Agreement, in accordance with the terms hereof, either of
the KTTI Parties signs a letter of intent or other agreement relating to a
transaction substantially similar to the transactions contemplated by this
Agreement, then the Company and Operations shall notify MHC immediately of such
event.
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ARTICLE VII
CONDITIONS TO THE MERGER
7.1 Conditions to Obligations of Each Party. The respective obligations
of each Party to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of the following conditions:
(a) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation, injunction, order or decree enacted, entered, enforced,
promulgated, issued or deemed applicable to the Merger which makes or which
could reasonably be expected to make the consummation of the Merger illegal.
(b) HSR Act. All waiting periods under the HSR Act relating to the
transactions contemplated hereby shall have expired or terminated early without
any conditions or restrictions related thereto.
(c) iStar Debt. The iStar Debt shall have been paid off in
accordance with the provisions of the iStar Amendment.
7.2 Conditions to Obligations of MHC and Acquisition. The obligations of
MHC and Acquisition to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, exclusively by MHC:
(a) Representations and Warranties. The representations and
warranties of the Company in this Agreement (a) that are not qualified by
materiality or Material Adverse Effect will be true and correct in all material
respects on and as of the Effective Time as though such representations and
warranties were made on and as of such time and (b) that are qualified by
materiality or Material Adverse Effect will be true and correct in all respects
on and as of the Effective Time as though such representations and warranties
were made on and as of such time, in each case, other than representations and
warranties that expressly speak only as of a specific date or time, which will
be true and correct as of such specified date or time.
(b) Covenants. The Company and Operations each shall have
performed and complied with all covenants and obligations of this Agreement
required to be performed and complied with by each of them as of the Effective
Time.
(c) Certificate of the Company. MHC shall have been provided with
a certificate executed on behalf of the Company by the Company's President or
its Chief Executive Officer, its Chief Operating Officer or its Chief Financial
Officer to the effect that, as of the Effective Time, the conditions set forth
in Sections 7.2(a) and 7.2(b) hereof have been met.
37
(d) Indebtedness Certificate. MHC shall have received the
Indebtedness Certificate, at least two (2) business days prior to the Closing.
(e) Legal Opinion. MHC shall have received the opinion of Ropes &
Xxxx LLP, counsel to the Company and Operations, in form and substance
reasonably acceptable to MHC and Acquisition.
(f) Settlement of Intercompany Accounts. All intercompany accounts
between any of the Acquired Companies, on the one hand, and any of the
Distributed Companies, on the other hand, shall have been paid or contributed to
the capital of the borrower, and no Acquired Company shall have any intercompany
payable to any Distributed Company. No intercompany debt obligations of the
Acquired Companies shall remain outstanding upon the completion of the Trails
Reorganization. To the extent possible, intercompany payables and intercompany
receivables will be netted between the Acquired Companies and the Distributed
Companies in order to minimize the amount required to be contributed to capital
by either party.
(g) Ground Lease. Operations shall have entered into and delivered
to MHC a Ground Lease, substantially in the form attached hereto as Exhibit E
(the "GROUND LEASE"), and shall have executed and delivered all documents and
made all filings required in order to give MHC a perfected security interest in
and to the collateral described in the Ground Lease and the documents entered
into in connection therewith.
(h) Consents and Lien Releases. As long as MHC fulfills its
obligations under Section 3.7 hereof, the Company shall have obtained the
consents, approvals and lien releases set forth on Schedule 7.2(h); provided,
however, that if such consents, approvals and lien releases have not been
obtained and this condition to Closing is the only condition that has not been
satisfied, the Parties shall negotiate in good faith to attempt to mutually
agree upon an alternative arrangement which will, at no additional cost or
detriment to MHC and with no material cost or material detriment to the Company,
provide MHC with the same rights and benefits MHC would have received had such
consents, approvals and lien releases been obtained.
(i) Reciprocal Rights/Cross Marketing Agreement. Operations shall
have entered into and delivered to MHC a Reciprocal Rights/Cross Marketing
Agreement in a form mutually agreed upon by the Parties (the "RECIPROCAL
RIGHTS/CROSS MARKETING AGREEMENT").
(j) REIT Election. MHC shall not have received an opinion of its
counsel stating that MHC's ownership of the Acquired Companies would prevent MHC
from making a valid election to be treated as a real estate investment trust
("REIT") under Section 856 of the Code as a result of any change in Law or the
interpretation of Law by a Governmental Entity after the date hereof.
(k) Earnings and Profits.
(i) The Company shall have delivered to MHC a report from a
nationally recognized accounting firm in form and substance
reasonably satisfactory to MHC regarding the "earnings and profits"
(within the meaning of, and calculated in accordance with, the Code)
of the Acquired Companies and the
38
Distributed Companies as of June 30, 2004, together with documents
supporting the statements contained in such report.
(ii) As of the Effective Time, the "earnings and profits"
(within the meaning of, and calculated in accordance with, the Code)
of the Acquired Companies shall not exceed the Residual Amount.
(l) FIRPTA Certificate. The Company shall have delivered to MHC a
certificate in accordance with Section 1445 of the Code in a customary form
mutually agreed upon by the Parties certifying that none of the Persons
receiving merger consideration in the transactions contemplated by this
Agreement is a "foreign person" as defined in Section 1445 of the Code and that
each of the Acquired Companies is therefore exempt from the withholding
requirements of said section.
(m) Permits and Licenses. The Company shall have delivered to MHC
documents in form and substance reasonably satisfactory to MHC evidencing the
fact that (i) the material Conditional Use Permits are validly held by the
applicable Acquired Companies and such Conditional Use Permits shall be valid
and in full force and effect immediately after the Effective Time, and (ii)
Operations holds all material Operations Authorizations and such Operations
Authorizations shall be valid and in full force and effect immediately after the
Effective Time.
(n) Trails Reorganization. The Company shall have consummated the
Trails Reorganization in accordance with the provisions of the Reorganization
Documents.
7.3 Conditions to the Obligations of the Company and Operations. The
obligations of the Company and Operations to consummate and effect this
Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, exclusively by the Company:
(a) Representations and Warranties. The representations and
warranties of the MHC and Acquisition in this Agreement (a) that are not
qualified by materiality or Material Adverse Effect will be true and correct in
all material respects on and as of the Effective Time as though such
representations and warranties were made on and as of such time and (b) that are
qualified by materiality or Material Adverse Effect will be true and correct in
all respects on and as of the Effective Time as though such representations and
warranties were made on and as of such time, in each case, other than
representations and warranties that expressly speak only as of a specific date
or time, which will be true and correct as of such specified date or time.
(b) Covenants. MHC and Acquisition shall each have performed and
complied with all covenants and obligations of this Agreement required to be
performed and complied with by each of them as of the Effective Time.
(c) Certificate of MHC. The Company shall have been provided with
a certificate executed on behalf of MHC to the effect that, as of the Effective
Time, the conditions set forth in Sections 7.3(a) and 7.3(b) hereof have been
met.
39
(d) Ground Lease. MHC shall have entered into the Ground Lease.
(e) Reciprocal Rights/Cross Marketing Agreement. MHC shall have
entered into and delivered to Operations the Reciprocal Rights/Cross Marketing
Agreement.
(f) Legal Opinion. The Company and Operations shall have received
the opinion of Xxxxxx Xxxxxx Xxxxx Xxxxxxxx, counsel to MHC and Acquisition, in
form and substance reasonably acceptable to the Company and Operations.
(g) Permits and Licenses. The Company shall have caused (i) the
material Conditional Use Permits to be validly held by the applicable Acquired
Companies and such Conditional Use Permits shall be valid and in full force and
effect immediately after the Effective Time, and (ii) Operations to hold all
material Operations Authorizations and such Operations Authorizations shall be
valid and in full force and effect immediately after the Effective Time.
(h) Note Purchase Agreement. The Note Purchase Agreement shall
have been executed and delivered by the Note Purchaser and the Notes purchased
thereunder for the Note Purchase Price.
ARTICLE VIII
SURVIVAL; INDEMNIFICATION
8.1 Survival of Representations and Warranties.
(a) All of the representations and warranties of the Company and
Operations contained in this Agreement (other than the representations and
warranties in Section 4.7 hereof) shall survive the Closing and terminate on the
date which is eighteen (18) months after the Closing Date and (ii) the
representations and warranties in Section 4.7 hereof shall survive the Closing
and terminate on the date which is three (3) years after the Closing Date.
(b) It is agreed that in the event notice of any claim for
indemnification under this Agreement with respect to any breach of any
representation or warranty or with respect to any other matter for which
indemnification is provided hereunder shall have been given within the
applicable survival period, the claims and rights to indemnification relating to
any such breach of a representation or warranty or other matters for which
indemnification is provided hereunder that are the subject of such
indemnification claim shall survive until such time as such claim is finally
resolved.
8.2 Indemnification By Operations. Operations hereby agrees that, from
and after the Closing Date, it shall indemnify and hold harmless MHC, the
Acquired Companies and their affiliates and, if applicable, MHC's and the
Acquired Companies' successors and assigns (collectively the "MHC INDEMNIFIED
PARTIES") from and against any damages, losses, charges, deficiencies, interest,
penalties and reasonable costs and expenses (including, but not limited to,
reasonable attorneys' fees) (collectively, "LOSSES") asserted against and
imposed on or sustained, incurred or suffered by any of the MHC Indemnified
Parties in any such case to the extent arising out of: (i) a breach of any
representation or warranty made by the Company or
40
Operations in this Agreement; (ii) the breach of any covenant or agreement of
the Company or Operations contained in this Agreement; or (iii) any liability or
obligation of any kind or nature whatsoever (other than an Assumed Liability) of
an Acquired Company that relates to the period prior to the Effective Time
(other than (i) any liability or obligation that results from a breach of this
Agreement or the Ground Lease by MHC, Acquisition or any of their Affiliates
party thereto or (ii) with respect to any liability or obligation in respect of
Taxes, any such liability that results from actions taken by MHC or its
Affiliates on the Closing Date that are not expressly contemplated by this
Agreement or the Ground Lease); provided, however, that (A) Operations shall not
be required to indemnify the MHC Indemnified Parties pursuant to this Section
8.2 or Section 6.5(i) hereof in an aggregate amount in excess of $16 million (it
being understood, however, that amounts payable by Operations with respect to
Taxes shown to be due on Pre-Closing Returns and Straddle Period Returns or with
respect to gain on the sale of Windsor campground and waterslide shall not be
included as an amount indemnified for this purpose), (B) no claim for
indemnification may be made after the date that is eighteen (18) months after
the Closing Date (except with respect to claims arising under Section 6.5(i)
hereof which claims for indemnification may be made until the date that is three
(3) years after the Closing Date) and (C) Operations' obligation to indemnify
the MHC Indemnified Parties for a breach by the Company or Operations of any
representation or warranty made by the Company or Operations in Sections 4.7 or
6.5(a) hereof is limited to the amount for which Operations is liable under
Section 6.5(i) hereof.
8.3 Indemnification By MHC and Surviving Corporation. MHC and the
Surviving Corporation hereby agree that, from and after the Closing Date, they
shall, jointly and severally, indemnify, defend and hold harmless Operations,
the Distributed Companies and their respective controlling stockholders,
officers, directors, employees, agents and affiliates, and each of their
respective heirs, executors, successors and assigns (collectively the
"OPERATIONS INDEMNIFIED PARTIES") from, against and in respect of any Losses
asserted against and imposed on or sustained, incurred or suffered by any of the
Operations Indemnified Parties in any such case to the extent arising out of:
(i) a breach by MHC or Acquisition of any representation or warranty made by MHC
or Acquisition in this Agreement; (ii) the breach of any covenant or agreement
of MHC, Acquisition or the Surviving Corporation contained in this Agreement; or
(iii) any liability or obligation of any kind or nature whatsoever, whether
known or unknown, contingent or otherwise, which first arises out of the conduct
of business of any Acquired Company after the Effective Time which is not
attributable to a matter which constitutes a breach of representation or
warranty made by Operations; provided, however, that (A) MHC and the Surviving
Corporation shall not be required to indemnify the Operations Indemnified
Parties in an aggregate amount in excess of $16 million, and (B) no claim for
indemnification may be made after the date that is eighteen (18) months after
the Closing Date (except with respect to claims arising with respect to Taxes,
which claims for indemnification may be made until the date that is three (3)
years after the Closing Date).
8.4 Third Party Claim Indemnification Procedures. With respect to third
party claims, all claims for indemnification by any MHC Indemnified Party or
Operations Indemnified Party (each an "INDEMNIFIED PARTY") shall be asserted and
resolved as set forth in this Section 8.4 In the event that any written claim or
demand for which a Party (an "INDEMNIFYING PARTY") may be required to pay an
indemnity hereunder pursuant to Sections 8.2 or 8.3 hereof is asserted against
or sought to be collected from any Indemnified Party by a third party, such
41
Indemnified Party shall promptly (and in any event within 10 days of receipt by
such Indemnified Party of notice of such claim) notify the Indemnifying Party of
such claim or demand and the amount or the estimated amount thereof to the
extent then feasible (which estimate shall not be conclusive of the final amount
of such claim and demand) (the "CLAIM NOTICE"). The Indemnifying Party shall
have 30 days from its receipt of the Claim Notice (the "NOTICE PERIOD") to
notify the Indemnified Party whether it will undertake the defense of such claim
or demand. Notwithstanding anything herein to the contrary, if the Indemnifying
Party undertakes the defense of such claim or demand, the undertaking of such
defense shall constitute acceptance of responsibility for such claim or demand
and the Indemnifying Party shall be fully responsible for such claim or demand.
All costs and expenses incurred by the Indemnifying Party in defending such
claim or demand shall be a liability of, and shall be paid by, the Indemnifying
Party. Except as hereinafter provided, in the event that the Indemnifying Party
notifies the Indemnified Party that it will defend the Indemnified Party against
such claim or demand, the Indemnifying Party shall have the right to defend the
Indemnified Party by appropriate proceedings and shall have the sole power to
direct and control such defense. If any Indemnified Party desires to participate
in any such defense it may do so at its sole cost and expense; provided that it
shall comply with reasonable instructions from the Indemnifying Party and shall
not take any formal actions inconsistent with or adverse to the defense of such
claim or demand by the Indemnifying Party. Notwithstanding the foregoing, the
Indemnified Party shall have the right to employ one counsel to represent it if
the Indemnified Party believes, based upon the advice of counsel, that it may
have available to it one or more defenses or counterclaims which are
inconsistent with one or more defenses or counterclaims which may be alleged by
the Indemnifying Party, and in any such event the reasonable fees and expenses
of such separate counsel shall be paid by the Indemnifying Party. The
Indemnifying Party shall not settle a claim or demand without the consent of the
Indemnified Party to the extent a settlement (A) imposes (i) any monetary
obligation on the Indemnified Party (other than any such amount as is subject to
indemnification under this Article VIII) or (ii) a future non-monetary
obligation on the Indemnified Party, (B) does not include as an unconditional
term thereof the giving by the Person or Persons asserting such claim to the
Indemnified Party of an unconditional release from all liability with respect
thereto, or (C) requires any undertaking or admission by such Indemnified Party.
If the Indemnifying Party elects not to defend the Indemnified Party against
such claim or demand, whether by not giving the Indemnified Party timely notice
as provided above or otherwise, then the Indemnified Party shall diligently
conduct the defense and the reasonable costs and expenses pertaining to such
defense shall be the liability of the Indemnifying Party hereunder; provided
that in any case the Indemnified Party shall not settle a claim or demand
without the consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed. To the extent the Indemnifying Party shall
direct, control or participate in the defense or settlement of any third party
claim or demand, the Indemnified Party shall give the Indemnifying Party and its
counsel access to, during normal business hours, the relevant business records
and other documents, and shall permit them to consult with the employees and
counsel of the Indemnified Party. Regardless of which Person assumes control of
the defense of any claim, each Party shall cooperate and provide the other Party
reasonable assistance in the defense thereof.
8.5 Further Indemnity Limitations. The amount of any Losses shall be
reduced (i) to the extent any Indemnified Party receives any insurance proceeds
with respect to such Losses (which shall not include payments pursuant to self
insurance programs), net of the present value
42
of any increase in insurance premiums to be paid by the Indemnified Party as a
result of such Losses and all costs and expenses incurred by the Indemnified
Party in recovering such proceeds from its insurers, (ii) to take into account
any Tax refund, Tax credit or reduction in Taxes actually and currently realized
as a result of the recognition of the Losses, and (iii) to take into account any
payment actually received by an Indemnified Party with respect to such Losses.
8.6 Adjustment to Merger Consideration. Any indemnification payments
received under Sections 8.2 or 8.3 hereof shall be treated as adjustments to the
Aggregate Conversion Amount.
8.7 Limitation on Remedies. Prior to the Closing the rights set forth in
Article IX hereof, and at and after the Closing the rights of the Parties set
forth in Sections 6.5(i) and 8.2 hereof and in Section 8.3 hereof, shall in each
case be the sole and exclusive remedies of the Parties with respect to claims
(whether based in contract, tort or otherwise) resulting from or relating to
this Agreement (or the breach thereof) or any of the transactions contemplated
hereby, including, but not limited to, any claim resulting from or relating to
any breach of any representation or warranty or failure to perform any covenant
or agreement contained in this Agreement. Notwithstanding anything in this
Agreement to the contrary, no Party shall be deemed to have waived any claim,
including any claim for fraud, which cannot be waived under applicable Law
(common or otherwise). In addition, MHC and the other MHC Indemnified Parties
expressly acknowledge and agree that Operations and its assets represent the
sole source of any amount that may become payable to any of them hereunder and
no partner of Operations (whether general or limited) shall have any liability
or obligation to any MHC Indemnified Party hereunder. No remedy or limitation
thereof provided in this Agreement shall affect or otherwise limit any of the
remedies granted to any Party under the Ground Lease.
ARTICLE IX
TERMINATION
9.1 Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time by the
mutual written consent of the Company and MHC.
9.2 Termination by the Company or MHC. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time upon
written notice by the Company or MHC if:
(a) the Merger shall not have been consummated by October 1, 2004,
or if the only condition to Closing not satisfied is the procurement of the
consents, approvals and lien releases specified in Section 7.2(h) hereof,
December 31, 2004; or
(b) if any judgment, order, decree, statute, law, ordinance, rule
or regulation, entered, enacted, promulgated, enforced or issued by any court or
other Governmental Entity of competent jurisdiction which (A) has the effect of
making the consummation of the Merger or the other transactions contemplated
hereby illegal, or (B) materially restricts, prevents or
43
prohibits consummation of the Merger or any of the other transactions
contemplated hereby, shall be in effect and shall have become final and
nonappealable.
9.3 Additional Termination by the Company or MHC. This Agreement may be
terminated and the Merger may be abandoned at any time on or after August 4,
2004 and prior to the Effective Time upon written notice by the Company or MHC
to the other Party if either the Board of Directors of MHC Inc. or the Board of
Directors of the Company shall not have approved, by the end of the day on
August 3, 2004, this Agreement, the Ground Lease, the other agreements to be
executed and delivered pursuant hereto and thereto, and the transactions
contemplated hereby and thereby.
9.4 iStar Amendment. This Agreement may be terminated and the Merger may
be abandoned at any time after the date that is fourteen (14) days after the
date of this Agreement prior to the date that is twenty-one (21) days after the
date of this Agreement upon written notice by MHC if the Company fails to obtain
and deliver to MHC within fourteen (14) days of the date hereof a true and
correct copy of a written agreement (the "iSTAR AMENDMENT") to the iStar loan
documents (the "iSTAR DEBT") which permits the pre-payment of the entire
outstanding balance (including principal and interest) of the iStar Debt with a
pre-payment premium in the approximate amount of $13 million, as previously
disclosed to MHC.
9.5 Effect of Termination; Remedies. In the event of termination of this
Agreement by either MHC or the Company as provided in this Article IX, this
Agreement shall forthwith become void and each of the Parties or their
respective Affiliates, officers, directors or stockholders shall be liable for
payment of expenses pursuant to Section 6.2 hereof. In the event of a willful
breach of this Agreement by a Party prior to the Effective Time, the other
Parties shall be entitled to the remedy of specific performance, without the
posting of bond or other security. In addition, in the event of a termination of
this Agreement by MHC or Acquisition prior to the Effective Time, the Company
and Operations shall be entitled to the remedy described in the side letter from
MHC Inc. to the Company and Operations of even date herewith, to the extent
provided for therein. Except as set forth in this Section 9.5, there shall be no
liability or obligation on the part of any Party or any of their respective
Affiliates, officers, directors, or stockholders as a result of a termination of
this Agreement pursuant to this Article IX.
ARTICLE X
GENERAL PROVISIONS
10.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
messenger or courier service, or mailed by registered or certified (return
receipt requested) or overnight mail to the Parties at the following addresses
(or at such other address for a Party as shall be specified by like notice);
provided, however, that notices sent by mail shall not be deemed given until
received:
44
(a) if to Operations or the Company:
KTTI Holding Company, Inc.
000 Xxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxx X. Xxxxxxxx Xx.
with a copy to:
Ropes & Xxxx LLP
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx
(b) if to MHC or Acquisition:
Manufactured Home Communities, Inc.
Xxx Xxxxx Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx
President and Chief Executive Officer
with a copy to:
Manufactured Home Communities, Inc.
Xxx Xxxxx Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxxxxx
Executive Vice President and General Counsel
with a copy to:
Xxxxxx Xxxxxx Xxxxx Xxxxxxxx
000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxx
10.2 Interpretation. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "but not
limited to." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.3 Amendment and Waiver. The Boards of Directors of MHC, Acquisition,
the Company and Operations may amend this Agreement at any time prior to the
Effective Time by execution of an instrument in writing signed by any person
duly authorized by, as applicable, the Board of Directors of each of MHC,
Acquisition, the Company and Operations. Any provision
45
of this Agreement may be waived; provided that any such waiver shall be binding
on MHC and Acquisition only if such waiver is set forth in a writing executed by
MHC and Acquisition; provided, further, that any such waiver shall be binding
upon the Company and Operations only if such waiver is set forth in a writing
executed by the Company and Operations. The waiver by any Party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any other breach.
10.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the Parties and delivered to the other Parties, it being understood that all
Parties need not sign the same counterpart.
10.5 Signature Delivery. This Agreement and any amendments hereto, to the
extent signed and delivered by means of a facsimile machine or other electronic
transmission, shall be treated in all manner and respects and for all purposes
as an original agreement and shall be considered to have the same binding legal
effect as if it were the original signed version thereof delivered in person. At
the request of any Party hereto, each other Party hereto shall re-execute
original forms hereof and deliver them to all other Parties. No Party hereto
shall raise the use of a facsimile machine or other means of electronic
transmission to deliver a signature or the fact that any signature was
transmitted or communicated through the use of a facsimile machine or other
means of electronic transmission as a defense to the formation or enforceability
of a contract, and each Party forever waives any such defense.
10.6 Entire Agreement. The exhibits and schedules hereto are incorporated
herein by reference. This Agreement and the documents, schedules and instruments
referred to herein and to be delivered pursuant hereto constitute the entire
agreement between the Parties pertaining to the subject matter hereof, and
supersede all other prior agreements and understandings, both written and oral,
among the Parties, or any of them, with respect to the subject matter hereof.
There are no other representations or warranties, whether written or oral,
between the Parties in connection with the subject matter hereof, except as
expressly set forth herein.
10.7 Assignments. Neither this Agreement nor any of the rights, interests
or obligations hereunder may be assigned by any of the Parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
Parties.
10.8 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement shall continue in full force and effect and the application of such
provision to other persons or circumstances shall be interpreted so as
reasonably to effect the intent of the Parties hereto. The Parties further agree
to replace such void or unenforceable provision of this Agreement with a valid
and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
10.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
46
10.10 Knowledge. "TO THE KNOWLEDGE OF THE COMPANY" shall mean the actual
knowledge, after reasonable and diligent inquiry, of Xxxx Xxxxxx, Xxxxx Xxxx,
Xxxxxx Xxxxxxx and Xxxx Xxxxxx.
10.11 Parties in Interest. Nothing in this Agreement, express or implied,
is intended to or shall confer upon any other Person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement;
provided, however, that the following rights and provisions shall inure to the
benefit of and shall be enforceable by the Persons specified therein: (i) the
right to receive the consideration payable in accordance with the terms hereof
including, without limitation, the Conversion Price per Share and the Option
Payments pursuant to Article III hereof and the Note Purchase Price pursuant to
Section 6.10 hereof, (ii) the indemnification rights under Article VIII hereof,
and (iii) the provisions of this Section 10.11.
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ARTICLE XI
DEFINITIONS
The definitions for the following defined terms used in this Agreement can
be found as follows:
Defined Term Section
------------ ---------------------
Acquired Companies.................................... Recitals
Acquired Company...................................... Recitals
Acquired Subsidiaries................................. Recitals
Acquired Subsidiary................................... Recitals
Acquisition........................................... Introduction
Affiliate............................................. Section 3.1
Aggregate Conversion Amount........................... Section 3.4(a)
Agreement............................................. Introduction
Assumed Liabilities................................... Section 1.4
Audited Financial Statements.......................... Section 4.4
Business Facilities................................... Section 4.16(b)
Certificate of Merger................................. Section 1.3
Certificates.......................................... Section 3.5(a)
Claim Notice.......................................... Section 8.4
Closing............................................... Section 1.2
Closing Date.......................................... Section 1.2
COBRA................................................. Section 4.18(a)(ii)
Code.................................................. Section 4.18(a)(iii)
Company............................................... Introduction
Company Common Stock.................................. Section 3.1
Company Employee Plan................................. Section 4.18(iv)
Company Intellectual Property......................... Section 4.10(a)(ii)
Company Registered Intellectual Property.............. Section 4.10(b)
Conditional Use Permits............................... Section 4.20
Conflict.............................................. Section 4.3
Contract.............................................. Section 4.11(a)
Contracts............................................. Section 4.11(a)
Controlling Party..................................... Section 6.5(h)
Conversion Certificate................................ Section 3.3
Conversion Price per Share............................ Section 3.4(b)
Current Balance Sheet................................. Section 4.4
DGCL.................................................. Recitals
Disclosure Statements................................. Section 4.20
Distributed Companies................................. Recitals
Distributed Company................................... Recitals
DOJ................................................... Section 6.3
DOL................................................... Section 4.18(a)(v)
Domain Names.......................................... Section 4.10(a)(i)
48
E&P Transactions...................................... Section 6.12
Effective Time........................................ Section 1.3
Employee.............................................. Section 4.18(a)(vii)
Employee Agreement.................................... Section 4.18(a)(viii)
Environmental Permits................................. Section 4.16(d)
ERISA................................................. Section 4.18(a)(vi)
ERISA Affiliate....................................... Section 4.18(a)(i)
Excess Land........................................... Section 1.4
Exhibits.............................................. Section 6.11
Existing Credit Facility.............................. Section 6.14
Existing Title Policies............................... Section 4.9(c)
Financials............................................ Section 4.4
FTC................................................... Section 6.3
GAAP.................................................. Section 3.7
Governmental Entity................................... Section 4.3
Ground Lease.......................................... Section 7.2(g)
Hazardous Material Activities......................... Section 4.16(b)
Hazardous Materials................................... Section 4.16(g)
HSR Act............................................... Section 4.3
Income Tax Straddle Period Return..................... Section 6.5(d)(ii)
Indebtedness.......................................... Section 3.7
Indebtedness Certificate.............................. Section 6.1
Indemnified Party..................................... Section 8.4
Indemnifying Party.................................... Section 8.4
Initial Press Release................................. Section 6.3
Intellectual Property................................. Section 4.10(a)(i)
IRS................................................... Section 4.18(a)(ix)
iStar Amendment....................................... Section 9.4
iStar Debt............................................ Section 9.4
Joint Venture Agreement............................... Section 6.15
KTTI Parties.......................................... Section 6.16
Land.................................................. Section 4.9(c)
Law................................................... Section 4.13
Leisure Time.......................................... Section 6.13
Letter of Transmittal................................. Section 3.5(b)
Liens................................................. Section 4.9(b)
Losses................................................ Section 8.2
Material Adverse Effect............................... Section 4.1(c)
Membership Contract................................... Section 4.12
Merger................................................ Recitals
MHC................................................... Introduction
MHC Inc............................................... Section 6.5(i)(i)
MHC Indemnified Parties............................... Section 8.2
Multiemployer Plan.................................... Section 4.18(a)(x)
Non-Controlling Party................................. Section 6.5(h)
Non-Income Tax Straddle Period Return................. Section 6.5(d)(iii)
49
Note Purchase Agreement............................... Recitals
Note Purchase Price................................... Recitals
Note Purchaser........................................ Recitals
Notes................................................. Recitals
Notice Period......................................... Section 8.4
Operating Business.................................... Recitals
Operations............................................ Introduction
Operations Authorizations............................. Section 4.20
Operations Indemnified Parties........................ Section 8.3
Operations Returns.................................... Section 6.5(d)(ii)
Option Payments....................................... Section 3.6
Options............................................... Section 3.6
Parties............................................... Introduction
Party................................................. Introduction
Paying Agent.......................................... Section 3.5(a)
Pension Plan.......................................... Section 4.18(a)(xi)
Person................................................ Section 4.2
Post-Closing Returns.................................. Section 6.5(d)(iii)
Pre-Closing Returns................................... Section 6.5(d)(ii)
Pre-Closing Taxable Periods........................... Section 6.5(c)
Real Property......................................... Section 4.9(c)
Reciprocal Rights/Cross Marketing Agreement........... Section 7.2(i)
Registered Intellectual Property...................... Section 4.10(a)(iii)
REIT.................................................. Section 7.2(j)
Reorganization Documents.............................. Recitals
Replacement Facility.................................. Section 6.14
Required Consents..................................... Section 4.3
Residual Amount....................................... Section 6.5(a)
Schedules............................................. Section 6.11
Stock Option Plan..................................... Section 3.6
Stockholders.......................................... Section 3.1
Straddle Period....................................... Section 6.5(d)(ii)
Surplus Land.......................................... Section 4.9(c)
Surviving Corporation................................. Section 1.1
Tax................................................... Section 4.7(a)
Tax Affiliate......................................... Section 6.5(i)(i)
Tax Controversy....................................... Section 6.5(h)
Tax Loss.............................................. Section 6.5(i)(i)
Tax Returns........................................... Section 4.7(c)(i)
Tax Sharing Agreement................................. Section 4.7(b)
Taxes................................................. Section 4.7(a)
Thousand Trails....................................... Section 4.4
To the Knowledge of the Company....................... Section 10.11
Trademarks............................................ Section 4.10(a)(i)
Trails Parties........................................ Section 4.3
Trails Party.......................................... Section 4.3
50
Trails Reorganization................................. Recitals
Transferred Benefits.................................. Section 6.6(a)
Unaudited June 30, 2004 Financial Statements.......... Section 4.4
IN WITNESS WHEREOF, MHC, Acquisition, the Company and Operations have
caused this Agreement to be signed and delivered by their respective duly
authorized officers, all as of the date first written above.
MHC:
MHC THOUSAND TRAILS TRUST
By: _________________________________________
Name: ___________________________________
Title: __________________________________
ACQUISITION:
THOUSAND TRAILS ACQUISITION, INC.
By: _________________________________________
Name: ___________________________________
Title: __________________________________
THE COMPANY:
KTTI HOLDING COMPANY, INC.
By: _________________________________________
Name: ___________________________________
Title: __________________________________
OPERATIONS:
THOUSAND TRAILS OPERATIONS HOLDING
COMPANY, L.P.
By: KTTI GP, LLC, its general partner
By: KTTI HOLDING COMPANY, INC., its
sole member
By:__________________________________________
Name: Xxxx Xxxxxxxx
Title: President
51
