Exhibit 10.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
BEI-RZT CORPORATION,
XXXXXXX HOTELS, INC.
AND
XXXXXXX ENTERTAINMENT COMPANY
(MAINLAND AGREEMENT)
JUNE 1, 2007
TABLE OF CONTENTS
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ARTICLE 1. PURCHASE AND SALE OF SHARES.......................................1
1.1. Transfer of Shares................................................1
ARTICLE 2. CONSIDERATION.....................................................2
2.1. Purchase Price....................................................2
2.2. Closing Estimate..................................................3
2.3. Purchase Price Adjustment.........................................3
2.4. Assets and Liabilities Related to Welfare Plans...................5
ARTICLE 3. CLOSING; OBLIGATIONS OF THE PARTIES...............................5
3.1. Closing Date......................................................5
3.2. Obligations of the Parties at the Closing.........................6
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SELLER AND XXXXXXX..............8
4.1. Corporate Status..................................................8
4.2. Authority.........................................................8
4.3. No Conflict.......................................................8
4.4. Consents..........................................................9
4.5. Capitalization....................................................9
4.6. Financial Statements.............................................10
4.7. Title to Assets and Properties; Sufficiency and Condition
of Assets........................................................10
4.8. Material Contracts...............................................11
4.9. Real Property; Leases............................................13
4.10. Intellectual Property............................................15
4.11. Litigation, Claims and Proceedings...............................16
4.12. Environmental and Safety and Health Matters......................16
4.13. Compliance with Law; Permits.....................................18
4.14. Employee Matters and Benefit Plans...............................18
4.15. Taxes............................................................22
4.16. Absence of Undisclosed Liabilities...............................25
4.17. Absence of Certain Changes.......................................25
4.18. Labor Matters....................................................26
4.19. Finder's Fee.....................................................27
4.20. Accounts Receivable..............................................27
4.21. Customers........................................................27
4.22. Insurance........................................................28
4.23. Bank Accounts....................................................28
4.24. Related Parties Transactions.....................................28
4.25. Assets of St. Xxxxxx and Whistler................................28
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ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF PURCHASER......................29
5.1. Corporate Status.................................................29
5.2. Authority........................................................29
5.3. No Conflict......................................................29
5.4. Compliance with Law..............................................30
5.5. Consents.........................................................30
5.6. Sufficient Funds.................................................30
5.7. Finder's Fee.....................................................30
5.8. No Reliance......................................................30
5.9. Litigation Claims and Proceedings................................30
ARTICLE 6. COVENANTS........................................................31
6.1. Interim Operations of the Company................................31
6.2. Consents.........................................................33
6.3. Publicity........................................................33
6.4. Access to Records and Properties.................................33
6.5. Further Action...................................................34
6.6. Expenses.........................................................34
6.7. Notification of Certain Matters..................................34
6.8. Employee Benefit Plans...........................................34
6.9. Intercompany Indebtedness........................................36
6.10. Debt and Guarantees..............................................36
6.11. Supplements to Disclosure Schedule...............................36
6.12. WARN Act.........................................................37
6.13. Obligations with Respect to Certain Claims.......................37
6.14. Hawaii Subsidiaries..............................................37
6.15. Information Rights...............................................37
6.16. Non-Competition..................................................38
6.17. Non-Solicitation.................................................38
6.18. Confidentiality..................................................38
6.19. Acknowledgment...................................................39
6.20. Assistance with SEC Filings......................................39
6.21. Closing of the Transaction.......................................40
6.22. Cooperation regarding Unclaimed Property Claims..................40
6.23 Stub Period Audited Financial Statements.........................40
ARTICLE 7. CLOSING CONDITIONS...............................................40
7.1. Conditions to Obligations of Seller and Purchaser to
Consummate the Transaction.......................................40
7.2. Additional Conditions to Obligations of Purchaser................40
7.3. Additional Conditions to Obligations of Seller...................42
ARTICLE 8. CERTAIN TAX MATTERS..............................................42
8.1. Responsibility for Filing Tax Returns............................42
8.2. Liability for Income Taxes.......................................43
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8.3. Apportionment of Straddle Period Income Taxes....................43
8.4. Cooperation on Tax Matters.......................................43
8.5. Refunds and Tax Benefits.........................................44
8.6. No Code Section 338 Election.....................................44
8.7. Certain Taxes....................................................44
8.8. Hawaii Disposition...............................................44
ARTICLE 9. TERMINATION......................................................45
9.1. Termination......................................................45
9.2. Effect of Termination and Abandonment............................45
ARTICLE 10. INDEMNIFICATION..................................................45
10.1. Survival of Representations and Warranties and Other
Obligations......................................................45
10.2. Indemnification Provisions for Benefit of Purchaser..............46
10.3. Indemnification Provisions for Benefit of Seller.................47
10.4. Procedure for Matters Involving Third Parties....................47
10.5. Limitations on Seller's Indemnification Liability................48
10.6. Limitations on Purchaser's Indemnification Liability.............49
10.7. Determination of Losses..........................................49
10.8. Exclusive Remedy.................................................49
ARTICLE 11. MISCELLANEOUS....................................................49
11.1. Notices..........................................................49
11.2. Certain Definitions; Interpretation..............................50
11.3. Severability.....................................................55
11.4. Entire Agreement; No Third-Party Beneficiaries...................55
11.5. Amendment; Waiver................................................56
11.6. Binding Effect; Assignment.......................................56
11.7. Disclosure Schedule..............................................56
11.8. Governing Law; Waiver of Jury Trial..............................56
11.9. Construction.....................................................56
11.10. Counterparts.....................................................56
11.11. Enforcement......................................................57
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Index of Defined Terms
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Term Section
---- -------
Accountants.............................................................2.3(c)
Accounts Receivable.......................................................4..20
Action.................................................................11.2(a)
Adjustment Amount.......................................................2.3(b)
Affiliate..............................................................11.2(a)
Affiliated Group.......................................................11.2(a)
Agreement.............................................................Recitals
Ancillary Agreements...................................................11.2(a)
Applicable Closing Conditions.............................................6..21
Applicable Litigation...............................................3.2(a)(vi)
Audited Financial Statements............................................4.6(a)
Benefit Liabilities....................................................4.14(k)
Benefit Plans..........................................................4.14(d)
Business...............................................................11.2(a)
Cap....................................................................10.5(a)
Cash - Unrestricted Cash and Working Capital...............................2.2
CERCLA.................................................................11.2(a)
Claim Notice...........................................................10.4(e)
Closing....................................................................3.1
Closing Balance Sheet...................................................2.3(c)
Closing Date...............................................................3.1
Closing Payment............................................................2.2
COBRA...................................................................6.8(b)
Code...................................................................11.2(a)
Company...............................................................Recitals
Company Covered Employees...............................................6.8(b)
Confidentiality Agreement...............................................6.4(b)
Control................................................................11.2(a)
Copyrights.............................................................11.2(a)
Credit Enhancement Obligations............................................6..10
Data Room..............................................................11.2(a)
Disclosure Schedule Supplement............................................6..11
Deductible.............................................................11.2(a)
Earnout................................................................11.2(a)
Effective Time.............................................................3.1
Encumbrances...............................................................1.1
Enhanced Severance Amount...............................................2.1(e)
Environmental Laws.....................................................11.2(a)
ERISA..................................................................4.14(a)
ERISA Affiliate........................................................10.2(c)
Extended Representations..................................................10.1
Term Section
---- -------
Financial Statements....................................................4.6(a)
FIRPTA..................................................................3.2(b)
Fundamental Representations...............................................10.1
GAAP....................................................................4.6(b)
Xxxxxxx...............................................................Recitals
Governmental Authority.................................................11.2(a)
Governmental Order.....................................................11.2(a)
Guaranty Liabilities...................................................11.2(a)
Hawaii Disposition......................................................7.2(g)
Hawaii Joint Venture Ownership Interests .............................Recitals
Hawaii Purchase Agreement.............................................Recitals
Hawaii Purchaser......................................................Recitals
Hazardous Substances...................................................11.2(a)
Indebtedness............................................................2.1(d)
Indemnified Party......................................................10.4(a)
Indemnifying Party.....................................................10.4(a)
Intellectual Property..................................................11.2(a)
Intellectual Property Rights...........................................11.2(a)
Interest Rate..........................................................2.2(a)
IRS....................................................................4.14(e)
Knowledge..............................................................11.2(a)
Law....................................................................11.2(a)
License Agreement......................................................4.10(g)
Losses....................................................................10.2
Mainland Subsidiaries..................................................11.2(a)
Marks..................................................................11.2(a)
Material Contracts......................................................4.8(a)
Xxxxxxx Litigation......................................................4.8(a)
Multiemployer Plans.......................................................6..13
Mutual Release......................................................3.2(a)(vi)
Other Benefit Plans....................................................4.14(d)
Patents................................................................11.2(a)
Permit.................................................................11.2(a)
Permitted Encumbrances..................................................4.7(a)
Person.................................................................11.2(a)
Pension Plans..........................................................4.14(a)
PBGC...................................................................4.14(h)
Post-Closing Straddle Period...............................................8.3
Post-Closing Tax Period....................................................8.2
Pre-Closing Claims........................................................6..13
Pre-Closing Period Taxes...............................................10.2(a)
Pre-Closing Straddle Period................................................8.3
Pre-Closing Tax Period.....................................................8.2
Purchase Price.............................................................2.1
Purchaser.............................................................Recitals
Purchaser Indemnified Parties.............................................10.2
Purchaser Material Adverse Effect......................................11.2(a)
Real Property...........................................................4.9(a)
Reference Balance Sheet.................................................4.6(a)
Related Parties...........................................................4..24
Release................................................................11.2(a)
Reportable Event......................................................4.14.(h)
Seller................................................................Recitals
Seller Consolidated Return..............................................8.1(a)
Seller Indemnified Parties................................................10.3
Seller Material Adverse Effect.........................................11.2(a)
Seller Note.............................................................2.2(a)
Seller's knowledge.....................................................11.2(b)
Shares.....................................................................1.1
Software...............................................................11.2(a)
Spin-Off Plan...........................................................6.8(c)
St. Xxxxxx.................................................................2.1
St. Xxxxxx Post-June 15 Sale...............................................2.1
St. Xxxxxx Transactional Expenses..........................................2.1
Straddle Period............................................................8.2
Subsidiary.............................................................11.2(a)
Taxes..................................................................11.2(a)
Taxing Authority.......................................................11.2(a)
Tax Return.............................................................11.2(a)
Termination Date........................................................9.1(b)
Third Party Claim......................................................10.4(a)
Transaction Bonuses.....................................................2.1(e)
Transaction Expenses....................................................2.1(f)
Transition Services Agreement...........................................3.2(a)
Unrestricted Cash......................................................11.2(a)
WARN Act...............................................................11.2(a)
Welfare Plans..........................................................4.14(c)
Working Capital.........................................................2.3(a)
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Index of Exhibits
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Exhibit A - Seller Note
Exhibit B - Transition Services Agreement
Exhibit C - Release
Exhibit D - Opinion of Bass, Xxxxx & Xxxx
Exhibit E - Opinion of DLA Piper US LLP
Exhibit F - St. Xxxxxx Agreement
Index of the Disclosure Schedule
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Section
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2.1(e) - Severance Benefits
4.1 - Corporate Status
4.3 - No Conflict 4.4 - Consents
4.5(c) - Listing of Mainland Subsidiaries 4.6(a) - Financial Statements
4.7(a) - Title to Assets and Properties; Permitted Encumbrances
4.7(b) - Sufficiency of Assets
4.7(c) - Personal Property
4.7(d) - Capital Expenditure Commitments
4.8(a) - Material Contracts
4.8(b) - Breach of Material Contracts
4.9(a) - Real Property List
4.9(b) - Real Property
4.9(c) - Real Property
4.9(d) - Condemnation
4.9(e) - Real Property Leases
4.10 - Intellectual Property
4.11 - Litigation, Claims and Proceedings
4.12 - Environmental and Safety and Health Matters
4.12(g) - Hazardous Substances
4.13 - Compliance with Law; Permits
4.14(a) - Employee Pension Plans
4.14(c) - Welfare Plans
4.14(d) - Other Benefit Plans
4.14(e) - Employee Benefits
4.14(f) - Employee Benefits
4.14(n) - Employee Benefits
4.15 - Taxes
4.16 - Absence of Undisclosed Liabilities
4.17 - Absence of Certain Changes
4.18(a) - Collective Bargaining; Labor Union Contracts
4.18(b) - Key Employees
4.18(d) - Employee Claims
4.18(e) - Employee List
4.18(f) - Employment at Will
4.22 - Insurance
4.23- Bank Accounts
4.24 - Related Party Transactions
6.1 - Interim Operations
6.8(a) - Benefit Plans
6.8(b) - Company Covered Employees
6.10 - Release of Guarantees
6.16 - Non-Competition
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made this 1ST day of June,
2007, by and among BEI-RZT Corporation, a Delaware corporation ("Purchaser"),
Xxxxxxx Hotels, Inc., a Delaware corporation ("Seller"), and Xxxxxxx
Entertainment Company, a Delaware corporation ("Gaylord").
WHEREAS, Gaylord owns all of the capital stock of Seller and will derive
material benefits from the execution and delivery of this Agreement and the
consummation of the transactions contemplated herein;
WHEREAS, Seller owns all of the issued and outstanding shares of the
capital stock of ResortQuest International, Inc., a Delaware corporation (the
"Company");
WHEREAS, Seller owns all of the outstanding capital stock of each of the
Hawaii Subsidiaries, and Xxxxxxx and Seller intend to cause the Company to sell,
transfer and convey all of the issued and outstanding shares of capital stock of
each of the Hawaii Subsidiaries to Vacation Holdings Hawaii, Inc. (the "Hawaii
Purchaser") prior to the Closing pursuant to the terms of that certain Stock
Purchase Agreement dated as of April 18, 2007 (the "Hawaii Purchase Agreement")
by and among Xxxxxxx, the Company, the Hawaii Purchaser and Interval Acquisition
Corp. (provided, that the ownership interests held, directly or indirectly, by
the Hawaii Subsidiaries in RHAC Holdings, LLC and Waipouli Holdings, LLC (such
ownership interests, the "Hawaii Joint Venture Ownership Interests") will be
distributed or transferred to Xxxxxxx or any Affiliate of Xxxxxxx prior to the
consummation of the transactions contemplated by the Hawaii Purchase Agreement
such that neither the Company nor the Hawaii Subsidiaries will hold the Hawaii
Joint Venture Ownership Interests as of the closing of the transactions
contemplated by the Hawaii Purchase Agreement or the closing of the transactions
contemplated hereby); and
WHEREAS, following the consummation of the transactions contemplated by
the Hawaii Purchase Agreement, Purchaser desires to acquire from Seller, and
Seller desires to sell to Purchaser, all of the issued and outstanding shares of
the capital stock of the Company upon and subject to the terms and conditions
contained in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements herein contained, the parties agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1. TRANSFER OF SHARES. On the terms and subject to conditions of this
Agreement, at the Closing (as defined in Section 3.1), Seller hereby agrees to
sell, transfer and convey to Purchaser, Xxxxxxx hereby agrees to cause Seller to
sell, transfer and convey to Purchaser, and Purchaser agrees to purchase and
acquire from Seller, 100 shares of common stock, $.001 par value per share, of
the Company, which constitute all of the issued and outstanding shares of
capital stock of the Company (collectively, the "Shares"), free and clear of any
and all options, proxies, voting trusts, voting agreements, judgments, pledges,
charges, escrows, rights of first refusal or first offer, transfer restrictions,
mortgages, indentures, claims, liens, security interests and other encumbrances
of every kind and nature whatsoever, whether arising by agreement, operation of
law or otherwise (collectively, "Encumbrances").
ARTICLE 2
CONSIDERATION
2.1. PURCHASE PRICE. The aggregate purchase price (the "Purchase Price")
for the Shares is equal to:
(a) Thirty-Five Million Dollars (US$35,000,000.00); plus
(b) an amount equal to all Unrestricted Cash on hand in the
Company's and the Mainland Subsidiaries' bank accounts as of the Effective
Time; plus
(c) the Working Capital (as defined in Section 2.3(a)), it being
agreed and understood that if such amount is a negative number, the
Purchase Price will be reduced on a dollar-for-dollar basis by the
negative amount of Working Capital; minus
(d) the amount required at Closing to discharge in full the
consolidated principal amount of, and accrued interest and prepayment
penalties or breakage fees with respect to, all indebtedness for borrowed
money of the Company and the Mainland Subsidiaries, including all
outstanding amounts under: (i) notes, bonds, debentures, and similar
instruments; (ii) capitalized leases; (iii) obligations under conditional
sale or other title retention agreements; (iv) any amounts payable in
connection with Earnouts and similar obligations but excluding accounts
payable and incurred in the ordinary course of business; and (v)
obligations, contingent or otherwise, in respect of any accrued interest,
success fees, prepayment penalties, interest rate SWAP breakage costs,
make-whole premiums or penalties and other costs and expenses associated
with the repayment of any of the foregoing (the "Indebtedness"); provided,
that the following will not be included in the definition of Indebtedness:
(a) any amounts owed by the Company or any of the Mainland Subsidiaries to
Seller in respect of which Seller will be making a capital contribution at
Closing pursuant to Section 6.9 below, or (b) obligations underlying the
guaranties to be released at Closing as set forth in Section 6.10 below;
minus
(e) to the extent not satisfied by Xxxxxxx or Seller prior to the
Closing, the amounts set forth on Section 2.1(e) of the Disclosure
Schedule under the "Enhanced Severance" column (but excluding the amounts
set forth on Section 2.1(e) of the Disclosure Schedule under the (1) "Base
Severance" column, and (2) "Outplacement Cost" column) payable to any
employee of the Company or any of the Mainland Subsidiaries listed on
Section 2.1(e) of the Disclosure Schedule by the Company or any of the
Mainland Subsidiaries as a result of the consummation of the transactions
contemplated by this Agreement (whether such payments or bonuses are oral
or in writing) (the "Transaction Bonuses"); minus
(f) except as set forth in Section 6.6, the amount required at
Closing to discharge in full all of the Company's expenses incurred in
connection with the preparation, execution and delivery of this Agreement
and the consummation of the Closing, including attorneys', accountants'
and other advisors' fees and expenses payable by the Company which have
not been paid as of the Closing (the "Transaction Expenses"); minus
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(g) the amount of any proceeds arising from any St. Xxxxxx
Post-June 15 Sale (as defined below) distributed by the Company to Seller
and Xxxxxxx, net of any St. Xxxxxx Transactional Expenses (as defined
below) incurred by Seller and Xxxxxxx.
Purchaser and Seller acknowledge and agree that (i) if the Closing occurs
on or prior to June 15, 2007, (x) Xxxxxxx and Seller will have no obligation to
cause the Company to sell ResortQuest St. Xxxxxx, Inc. and Xxxxx Xxxxxxx Inc.
(collectively, "St. Xxxxxx"), or to enter into any agreement in connection
therewith, and (y) the effective time of the closing of any sale of St. Xxxxxx
will occur after the Effective Time, and (ii) if the Closing occurs after June
15, 2007, Xxxxxxx and Seller will cooperate with Purchaser to consummate the
sale of St. Xxxxxx on such terms as are mutually acceptable to Seller and
Purchaser (any such sale that occurs after June 15, 2007, the "St. Xxxxxx
Post-June 15 Sale"). A form of the definitive purchase agreement with respect to
the sale of St. Xxxxxx entered into by Purchaser and acceptable to Seller
(subject to the other terms and conditions hereof) is attached hereto as Exhibit
F. In the event that the St. Xxxxxx Post-June 15 Sale is consummated prior to
Closing, notwithstanding anything contained herein to the contrary, Xxxxxxx and
Seller may cause the Company and the Mainland Subsidiaries to distribute to
Xxxxxxx and Seller all proceeds received in connection with the St. Xxxxxx
Post-June 15 Sale, and the amount of such proceeds will be an adjustment to the
Purchase Price pursuant to Section 2.1(g) above. Purchaser will be responsible
for all reasonable out-of-pocket expenses (including attorneys', accountants'
and other advisors' fees and expenses) incurred by Xxxxxxx and Seller in
connection with any St. Xxxxxx Post-June 15 Sale (the "St. Xxxxxx Transactional
Expenses"), which amounts will be an adjustment to the Purchase Price pursuant
to Section 2.1(g) above. Provided that the Closing occurs, Purchaser shall fully
indemnify and hold harmless Seller and Xxxxxxx for any obligations and
liabilities of Seller and Xxxxxxx arising in connection with any St. Xxxxxx
Post-June 15 Sale and the definitive purchase agreement and related
documentation entered into in connection therewith. For purposes of
clarification, Xxxxxxx and Seller will not have any obligation to provide
services under the Transition Services Agreement to St. Xxxxxx following the St.
Xxxxxx Post-June 15 Sale. Purchaser and Seller acknowledge and agree that, in
the event that the St. Xxxxxx Post-June 15 Sale is consummated prior to Closing,
Xxxxxxx will cause the Financial Statements to be updated prior to Closing to
reflect the omission of St. Xxxxxx from the financial information included in
the Financial Statements, and that it will be a condition to the closing
obligations of both Purchaser and Seller that such Financial Statements have
been so updated.
2.2. CLOSING ESTIMATE. For purposes of the Closing, Purchaser and Seller
shall make a good faith estimate of the Purchase Price (the "Closing Payment")
based upon the most recent ascertainable financial information of the Company
and the Mainland Subsidiaries, as set forth below. The estimate of the
Unrestricted Cash, the Working Capital and the Indebtedness shall be derived
from an unaudited consolidated balance sheet of the Company and the Mainland
Subsidiaries dated as of the last day of the month preceding the Closing. The
estimate of the Transaction Expenses shall be derived from invoices or similar
documentation delivered by the parties to whom such amounts are owed and
delivered to Purchaser by Seller no later than two business days prior to the
Closing. At the Closing:
(a) Purchaser shall deliver to Xxxxxxx a junior subordinated
promissory note in substantially the form attached hereto as Exhibit A
(the "Seller Note") in the original principal amount of $8,000,000, with
interest thereon payable at a rate equal to 10% per annum on the terms set
forth therein (the "Interest Rate").
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(b) Purchaser shall pay the remainder of the Closing Payment to
Seller, by wire transfer of immediately available funds to the bank
account specified in the wire transfer instructions provided by Seller to
Purchaser.
2.3. PURCHASE PRICE ADJUSTMENT.
(a) Working Capital. "Working Capital" as of a given date shall
mean the amount calculated by subtracting the current liabilities of the
Company and the Mainland Subsidiaries as of that date, excluding (i)
liability for income taxes, (ii) capital lease obligations, (iii) interest
payable, (iv) the current portion of long-term debt, (v) intercompany
payables owing to Seller or its Affiliates or their Subsidiaries, (vi) any
Seller or Xxxxxxx (as hereinafter defined) insurance liability allocation
(including for self-insured claims or retention), and (vii) to the extent
otherwise includable in the Working Capital calculation, all amounts
deducted from the Purchase Price pursuant to Section 2.1(d), Section
2.1(e) or Section 2.1(f) above, from the current assets of the Companies
and their Subsidiaries as of that date, excluding (i) Unrestricted Cash,
(ii) current deferred income tax assets, (iii) any other income Tax
assets, (iv) prepaid insurance premiums, and (v) intercompany receivables
owed by Seller or its Affiliates or their Subsidiaries; provided that, for
the avoidance of doubt, calculations of inventory and accounts receivable
shall be net of the applicable reserve. For purposes of clarification,
neither Xxxxxxx nor Seller shall have any liability with respect to the
current liabilities set forth on the Closing Balance Sheet included in the
calculation of the Working Capital as of the Closing.
(b) Post-Closing Payment. The "Adjustment Amount" shall be
determined by subtracting the Closing Payment from the Purchase Price as
finally determined pursuant to this Section 2.3. If the Adjustment Amount
is positive, the Adjustment Amount shall be paid to Seller by Purchaser by
wire transfer to an account specified by Seller. If the Adjustment Amount
is negative, the Adjustment Amount (treated as if it were a positive
number) shall be paid to Purchaser by Seller by wire transfer to an
account specified by Purchaser. Within three business days after the
calculation of the Adjustment Amount becomes binding and conclusive on all
parties pursuant to Section 2.3(c), Seller or Purchaser, as the case may
be, shall make the wire transfer payment provided for in this Section
2.3(b).
(c) Adjustment Procedure.
(i) Seller shall prepare a consolidated balance sheet as of
the Closing Date of the Company and the Mainland Subsidiaries in
accordance with GAAP applied consistently with the Financial
Statements (as hereinafter defined), which will present fairly, in
all material respects, the assets and liabilities of the Company and
the Mainland Subsidiaries (the "Closing Balance Sheet"). Seller
shall then determine the Purchase Price based upon the Closing
Balance Sheet. Seller shall deliver the Closing Balance Sheet and
its determination of the Purchase Price to Purchaser within ninety
(90) days following the Closing Date. Seller's delivery shall
include a description in reasonable detail of the components and
amounts of the Purchase Price (i.e., the Unrestricted Cash, the
Working Capital, the Indebtedness, the Transaction Bonuses, and the
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Transaction Expenses) and a calculation of the Adjustment Amount
based upon Seller's calculation of the Purchase Price.
(ii) If within thirty (30) days following delivery of the
Closing Balance Sheet and the calculation of the Purchase Price,
Purchaser has not given Seller written notice of its objection as to
the Purchase Price calculation (which notice shall state in
reasonable detail the basis of Purchaser's objection and Purchaser's
calculation of the Purchase Price), then the Purchase Price as
calculated by Seller shall be binding and conclusive on the parties
and shall be used in computing the Adjustment Amount.
(iii) If Purchaser duly gives Seller such notice of objection,
and if Seller and Purchaser fail to resolve the issues outstanding
with respect to the Closing Balance Sheet and the calculation of the
Purchase Price within thirty (30) days of Seller's receipt of
Purchaser's objection notice, Seller and Purchaser shall submit the
issues remaining in dispute to a nationally recognized certified
public accounting firm that has not performed accounting, tax or
audit services for Purchaser, Seller or any of their respective
Affiliates during the past three years (the "Accountants"), for
resolution in accordance with the terms of the Agreement and GAAP
consistently applied with the Financial Statements (hereinafter
defined). If Seller and Purchaser are unable to agree upon the
identity of the Accountants, the auditors of Purchaser's ultimate
parent and Xxxxxxx shall jointly select the Accountants. If issues
are submitted to the Accountants for resolution, (i) Seller and
Purchaser shall furnish or cause to be furnished to the Accountants
such work papers and other documents and information relating to the
disputed issues as the Accountants may request and are available to
that party or its agents and shall be afforded the opportunity to
present to the Accountants any material relating to the disputed
issues and to discuss issues with the Accountants; (ii) the
determination of the Purchase Price by the Accountants, as set forth
in a notice to be delivered to both Seller and Purchaser within
sixty (60) days of the submission to the Accountants of the issues
remaining in dispute, shall be final, binding and conclusive on the
parties and shall be used in calculation of the Adjustment Amount;
and (iii) Seller and Purchaser will each bear fifty percent (50%) of
the fees and costs of the Accountant for such determination.
(iv) Each party agrees to provide the other party with all
relevant documents and information reasonably requested by such
other party in connection with the procedures set forth in this
Section 2.3(c).
2.4. ASSETS AND LIABILITIES RELATED TO WELFARE PLANS. For purposes of
determining the Working Capital pursuant to this Article 2, the assets and
liabilities of the Company and the Mainland Subsidiaries included in the Working
Capital determination shall not include any assets or liabilities of the Company
or any Mainland Subsidiary under or related to the Xxxxxxx Entertainment Company
Employees' Group Health Plan, the Xxxxxxx Entertainment Company Flexible Benefit
Plan, the Xxxxxxx Entertainment Company Health Care Reimbursement Program or the
Xxxxxxx Entertainment Company Dependent/Child Care Program.
5
ARTICLE 3
CLOSING; OBLIGATIONS OF THE PARTIES
3.1. CLOSING DATE. The closing (the "Closing") shall take place at 10:00
a.m., local time, at the offices of Bass, Xxxxx & Xxxx PLC, Nashville,
Tennessee, on June 1, 2007 (subject to the satisfaction or waiver of all
conditions to Closing set forth in Article 7 hereof), or on such other date, or
at such other time or place, as shall be mutually agreed upon by Seller and
Purchaser; provided, however, that the date of the Closing shall be
automatically extended from time to time for so long as any of the conditions
set forth in Article 7 shall not be satisfied or waived, subject, however, to
the provisions of Section 9.1. The date on which the Closing occurs in
accordance with the preceding sentence is referred to in this Agreement as the
"Closing Date." In the event that the Closing occurs on June 1, 2007, the
Closing will be deemed to have become effective at 11:59:30 p.m., Central time
on May 31, 2007, and in the event that the Closing occurs on any other date, the
Closing will be deemed to have become effective at such time as the parties
mutually agree (the "Effective Time").
3.2. OBLIGATIONS OF THE PARTIES AT THE CLOSING.
(a) At the Closing, Purchaser shall deliver to Seller:
(i) payment of the Closing Payment as specified in Section
2.2;
(ii) a copy of resolutions of the Board of Directors of
Purchaser, certified by Purchaser's Secretary, authorizing the
execution, delivery and performance of this Agreement and the other
documents referred to herein to be executed by Purchaser, and the
consummation of the transactions contemplated hereby;
(iii) the Transition Services Agreement in substantially the
form attached hereto as Exhibit B (the "Transition Services
Agreement"), duly executed by Purchaser;
(iv) a certificate of good standing of the Purchaser issued
not earlier than ten days prior to the Closing Date by the secretary
of state of the state in which the Purchaser is incorporated;
(v) a certificate of the secretary of Purchaser certifying
as true and correct the following: (i) the incumbency and specimen
signature of each officer of Purchaser executing this Agreement and
any other document delivered hereunder on behalf of Purchaser; (ii)
a copy of Purchaser's certificate of incorporation; and (iii) a copy
of Purchaser's by-laws; and
(vi) a mutual release (the "Mutual Release") in form
reasonably acceptable to Seller and Purchaser providing for the
release of all current or future claims and/or counterclaims and
liabilities by the plaintiffs and defendants with respect to the
lawsuit, Case No. CE06-00820-063 (the "Applicable Litigation"),
listed under No. 4 of the chart entitled "ResortQuest International,
Inc. Litigation - May 2007" included in Section 4.11 of the
Disclosure Schedule relating to the Applicable Litigation, executed
by such defendants.
6
(b) At the Closing, Seller will deliver to Purchaser, and Xxxxxxx
shall cause Seller to deliver to Purchaser:
(i) all stock certificates representing the Shares, duly
endorsed to Purchaser or accompanied by a duly executed stock power;
(ii) a copy of resolutions of the Board of Directors of
Seller, certified by Seller's Secretary, authorizing the execution,
delivery and performance of this Agreement and the other documents
referred to herein to be executed by Seller, and the consummation of
the transactions contemplated hereby;
(iii) the Transition Services Agreement, duly executed by
Seller;
(iv) the minute books and stock records of the Company and
the Mainland Subsidiaries;
(v) the written resignations effective as of the Closing
Date of such directors and officers of the Company and the Mainland
Subsidiaries as requested by Purchaser to resign;
(vi) a release in the form attached hereto as Exhibit C (the
"Release"), executed by Xxxxxxx and Seller;
(vii) releases of all liens and other encumbrances and
security interests (excluding Permitted Encumbrances) held by the
holders of Indebtedness in any of the Company's and the Mainland
Subsidiaries' assets, including UCC financing statement amendments
providing for the termination of all financing statements with
respect thereto;
(viii)to the extent required by law, a certificate in
compliance with the Foreign Investment in Real Property Tax Act, as
amended ("FIRPTA"), and the Treasury Regulations thereunder
certifying that Seller is not a foreign person or entity subject to
withholding under FIRPTA;
(ix) a certified copy of the Company's certificate of
incorporation, issued not earlier than ten days prior to the Closing
Date by the Secretary of State of Delaware;
(x) except with respect to the entities set forth on
Schedule 4.1, certificates of good standing of the Company and the
Mainland Subsidiaries issued not earlier than ten days prior to the
Closing Date by the secretaries of state or equivalent authority of
each jurisdiction in which the Company and the Mainland Subsidiaries
are either incorporated, formed or qualified to do business as a
foreign corporation or limited liability company (or in the case of
the foreign qualification of the Company with the State of
California, verbal confirmation thereof, with such good standing
certificate to be delivered by Seller promptly following the
Closing);
(xi) a certificate of the secretary of Seller certifying as
true and correct the following: (i) the incumbency and specimen
signature of each officer of Seller executing this Agreement and any
other document delivered hereunder on behalf of Seller; and (ii) a
copy of Seller's by-laws;
7
(xii) a certificate of the secretary of Xxxxxxx certifying as
true and correct the following: (i) the incumbency and specimen
signature of each officer of Xxxxxxx executing this Agreement and
any other document delivered hereunder on behalf of Seller; (ii) a
copy of Gaylord's certificate of incorporation; and (iii) a copy of
Gaylord's by-laws;
(xiii) the Mutual Release, executed by Xxxxxxx and Seller; and
(xiv) without limitation by specific enumeration of the
foregoing, all other documents reasonably required from Seller to
consummate the transactions contemplated hereby.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER AND XXXXXXX
Except as disclosed in the Disclosure Schedule attached hereto, Seller and
Xxxxxxx jointly and severally represent and warrant to Purchaser as follows:
4.1. CORPORATE STATUS. Each of the Company and each Mainland Subsidiary
is a corporation or limited liability company duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization
(except as otherwise set forth in Section 4.1 of the Disclosure Schedule) and
each (a) has all requisite corporate or limited liability company power under
the laws of its jurisdiction of organization and authority to own, operate or
lease its properties and assets and to carry on its business as it is now being
conducted, and (b) is duly qualified to do business and is in good standing in
each of the jurisdictions in which the ownership, operation or leasing of its
properties and assets and the conduct of its business requires it to be so
qualified, licensed or authorized, except where the failure to have such power
and authority or to be so qualified, licensed or authorized would not reasonably
be expected to have a Seller Material Adverse Effect. Seller has made available
to Purchaser in Seller's Data Room, true, accurate and complete copies of the
certificates of incorporation and bylaws (or similar organization documents), as
amended, of the Company and each of the Mainland Subsidiaries, each as in effect
on the date hereof.
4.2. AUTHORITY. Each of Xxxxxxx and Seller has all requisite corporate
power and authority to enter into this Agreement and each of the Ancillary
Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and each of the Ancillary Agreements by each of Xxxxxxx and Seller and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Xxxxxxx and the Board of Directors and
sole stockholder of Seller, and no other corporate proceedings are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
or thereby. This Agreement has been, and the Ancillary Agreements to be executed
and delivered by Xxxxxxx and Seller at Closing will be, duly executed and
delivered by each of Xxxxxxx and Seller, and (assuming due authorization and
delivery by Purchaser), this Agreement constitutes, and the Ancillary Agreements
to which Seller or Xxxxxxx is a party that will be executed at Closing will
constitute a legal, valid and binding obligation of each of Xxxxxxx and Seller
enforceable against Xxxxxxx and Seller in accordance with their respective
terms, subject to general principles of equity and except as the enforceability
thereof may be limited by applicable bankruptcy, insolvency, reorganization or
other similar laws of general application relating to creditors' rights.
8
4.3. NO CONFLICT. Except as set forth in Section 4.3 of the Disclosure
Schedule, neither the execution, delivery and performance of this Agreement by
Xxxxxxx and Seller nor the consummation by Seller of the transactions
contemplated hereby will (a) violate, conflict with or result in the breach of
any term or provision of the certificate of incorporation or bylaws of Xxxxxxx
or Seller, (b) conflict with or violate in any material respect, any Law
applicable to Xxxxxxx, Seller, the Company or any of the Mainland Subsidiaries
or any of their respective assets, properties or businesses, or (c) conflict
with or violate, result in the breach of any term or provision of, or constitute
a default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation or cancellation of, or result in
the creation of any Encumbrances on any of the Shares or on any of the assets or
properties of the Company or any Mainland Subsidiary pursuant to, any Material
Contract.
4.4. CONSENTS. Except as set forth in Section 4.4 of the Disclosure
Schedule, no action, approval, consent or authorization by, or any other order
of, filing with or notification to any Governmental Authority, is or will be
necessary to make this Agreement or any of the agreements or instruments to be
executed, performed and delivered by Xxxxxxx and Seller pursuant hereto a legal,
valid and binding obligation of Xxxxxxx and Seller, subject to general
principles of equity and except as the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws of
general application relating to creditors' rights, or to consummate the
transactions contemplated hereunder.
4.5. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 100
shares of common stock, $.001 par value per share, all of which are issued
and outstanding. All of the Shares are validly issued, fully paid and
nonassessable and held beneficially and of record by Seller, free and
clear of Encumbrances. The Shares constitute all of the issued and
outstanding capital stock of the Company.
(b) There are (i) no outstanding obligations, options, warrants,
convertible securities or other rights, agreements, arrangements or
commitments of any kind relating to the capital stock of the Company or
obligating the Company to issue or sell any shares of capital stock of, or
any other interest in, the Company, (ii) no outstanding contractual
obligations of the Company to repurchase, redeem or otherwise acquire any
shares of its capital stock or to provide funds to, or make any investment
(in the form of a loan, capital contribution or otherwise) in, any other
Person, and (iii) no voting trusts, stockholder agreements, proxies or
other agreements or understandings in effect with respect to the voting or
transfer of any of the capital stock of the Company.
(c) Section 4.5(c) of the Disclosure Schedule sets forth a true
and complete list of all Mainland Subsidiaries, listing for each Mainland
Subsidiary its name, its jurisdiction of organization, the percentage of
stock or other equity interest of each Mainland Subsidiary owned by the
Company or another Mainland Subsidiary and, for each Mainland Subsidiary
that is a corporation, the authorized and outstanding capital stock of
each such Mainland Subsidiary. Other than the Mainland Subsidiaries and
other entities set forth in Section 4.5(c) of the Disclosure Schedule,
there are no other corporations, partnerships, limited liability
companies, joint ventures, associations or other similar entities in which
the Company or any Mainland Subsidiary owns, of record or beneficially,
9
any direct or indirect equity or other similar interest or any right
(contingent or otherwise) to acquire the same. All of the issued and
outstanding shares (or voting securities) of each of the Mainland
Subsidiaries that are corporations are validly issued, fully paid and
nonassessable. Except as set forth in Section 4.5(c) of the Disclosure
Schedule, (i) the Company or one of the Mainland Subsidiaries owns
beneficially and of record all of the outstanding shares of capital stock
(or voting securities) of each of the Mainland Subsidiaries free and clear
of any Encumbrances, (ii) there are no outstanding obligations, options,
warrants, convertible securities or other rights, agreements or
commitments of any kind relating to the capital stock of any Mainland
Subsidiary or obligating the Company or any Mainland Subsidiary to issue
or sell any shares of capital stock of, or any other interest in, any
Mainland Subsidiary, (iii) there are no outstanding contractual
obligations of any Mainland Subsidiary to repurchase, redeem or otherwise
acquire any shares of its capital stock or to provide funds to, or make
any investment (in the form of a loan, capital contribution or otherwise)
in, any other Person, and (iv) there are no voting trusts, stockholder
agreements, proxies or other agreements or understandings in effect with
respect to the voting or transfer of any of the Mainland Subsidiaries'
respective capital stock.
4.6. FINANCIAL STATEMENTS.
(a) Attached hereto as Section 4.6(a) of the Disclosure Schedule
are true and complete copies of (i) the audited combined balance sheet and
statements of operations for the Company and the Mainland Subsidiaries as
of December 31, 2004, 2005 and 2006 and for the years then ended (the
"Audited Financial Statements"), and (ii) the unaudited balance sheet and
statement of operations for the Company and the Mainland Subsidiaries as
of March 31, 2007 (collectively, the "Financial Statements"). The March
31, 2007 balance sheet is referred to herein as the "Reference Balance
Sheet".
(b) The Financial Statements (i) have been prepared based on the
books and records of the Company and the Mainland Subsidiaries in
accordance with United States generally accepted accounting principles
("GAAP") as applied consistent with the past practice of Seller and
Xxxxxxx and the Company's normal accounting practices (except as set forth
in the footnotes to the Financial Statements) and (ii) present fairly, in
all material respects, the assets and liabilities and combined results of
operations and cash flows of the Company and the Mainland Subsidiaries as
of the dates indicated and for the periods indicated, in accordance with
GAAP (except as set forth in the footnotes to the Audited Financial
Statements). The Audited Financial Statements meet the requirements of
Regulation S-X of the Securities Act. Seller shall also cooperate to cause
the delivery of the consent of Seller's independent accountants to the use
of their reports thereon in the SEC Reports of the Purchaser's ultimate
parent, as required by applicable law or regulation. The books and records
of the Company and the Mainland Subsidiaries fairly reflect, in reasonable
detail, the activities of the Company and the Mainland Subsidiaries.
4.7. TITLE TO ASSETS AND PROPERTIES; SUFFICIENCY AND CONDITION OF ASSETS.
(a) The Company and the Mainland Subsidiaries have good and
marketable title to, or valid leasehold interests in, their assets and
properties free and clear of any Encumbrances, except for the Permitted
Encumbrances. For purposes of this Agreement: "Permitted Encumbrances"
means: (i) encumbrances for assessments, taxes, water, sewer and other
10
similar charges not yet due and payable in the ordinary course of business
and as applied in a manner consistent with the past practices of Seller
and the Mainland Subsidiaries or that the Company or any of the Mainland
Subsidiaries is contesting in good faith through appropriate proceedings
and which have been fully reserved for on the Reference Balance Sheet;
(ii) easements, covenants, conditions and restrictions as to the use of
the real property, and reservations of record, sewers, electric,
telegraph, telephone and other utility lines, zoning, ordinances and
building codes; (iii) liens securing the claims of materialmen, landlords
and others for payments not yet delinquent; (iv) any leases, subleases or
licenses of the Company or the Mainland Subsidiaries, which are listed in
Section 4.7(a) of the Disclosure Schedule; (v) all encumbrances relating
to liens securing borrowed money to be released at or prior to the Closing
and which are listed in Section 4.7(a) of the Disclosure Schedule; and
(vi) any encumbrances listed in Section 4.7(a) of the Disclosure Schedule.
(b) Except for the services to be provided under the Transition
Services Agreement and as disclosed in Section 4.7(b) of the Disclosure
Schedule, the Company's and the Mainland Subsidiaries' assets are adequate
to conduct their Business as it is presently being conducted.
(c) Except as set forth in Section 4.7(c) of the Disclosure
Schedule, all (i) tangible personal property used in the business of the
Company and the Mainland Subsidiaries and (ii) records, tangible assets,
licenses, permits, title policies, copies of contracts, development or
construction plans or copies of leases owned by or pertaining to the
Company and the Mainland Subsidiaries is in the possession of the Company
and the Mainland Subsidiaries.
(d) Section 4.7(d) of the Disclosure Schedule lists all of the
capital expenditure commitments in excess of $10,000 of the Company and
the Mainland Subsidiaries as of the date of this Agreement.
4.8. MATERIAL CONTRACTS.
(a) Section 4.8(a) of the Disclosure Schedule sets forth a true
and complete list of all the Material Contracts of the Company or a
Mainland Subsidiary. As used herein, "Material Contracts" means all of the
following, whether oral or written:
(i) each agreement or arrangement of the Company or any
Mainland Subsidiary that was not entered into in the ordinary course
of business as presently conducted that requires the payment or
incurrence of liabilities, or the rendering of services, by the
Company or any Mainland Subsidiary, subsequent to the date of this
Agreement of more than One Hundred Thousand Dollars ($100,000.00);
(ii) each loan or credit agreement, security agreement,
pledge, guaranty, note, mortgage, bond, debenture, indenture, letter
of credit, or other agreement or instrument with respect to the
Indebtedness;
(iii) each partnership, limited liability company, joint
venture or other similar agreement to which the Company or any
Mainland Subsidiary is a party or by which any of them is otherwise
bound which provides for a sharing of profits, losses, costs or
liability with a Person other than the Company and the Mainland
Subsidiaries;
11
(iv) each agreement, arrangement, contract or commitment of
the Company or any Mainland Subsidiary restricting or otherwise
affecting the ability of the Company or any Mainland Subsidiary to
(x) compete in any jurisdiction, or (y) with respect to any such
restriction which materially affects the business of the Company and
the Mainland Subsidiaries, to solicit for employment or hire any
Person;
(v) each employment or consulting agreement between the
Company or a Mainland Subsidiary and any of the employees or
consultants of the Company or the Mainland Subsidiaries that (A)
obligates the Company or a Mainland Subsidiary to make annual cash
payments in an amount exceeding Fifty Thousand Dollars ($50,000..00)
or make any cash payments to any Person in the event of a
termination of such Person's employment or consulting arrangement
with the Company or any of the Mainland Subsidiaries or on account
of the transactions contemplated by this Agreement; or (B) contain
restrictive covenants for the benefit of the Company or a Mainland
Subsidiary from an employee, such as confidentiality,
non-competition, non-solicitation and no-hire provisions (but
excluding agreements solely related to assignments of intellectual
property rights);
(vi) each agreement for the sale of a material asset of the
Company or any Mainland Subsidiary that has not yet been consummated
and was not entered into in the ordinary course of business as
presently conducted;
(vii) each other existing agreement, not otherwise covered by
clauses (i) through (vi), that requires payments by or to the
Company or any Mainland Subsidiary in excess of Two Hundred Thousand
Dollars ($200,000.00) during any one year, excluding (a) wholesale
agreements, (b) travel agency agreements, (c) rental management
agreements, (d) condominium and homeowner association agreements,
and (e) real estate listing agreements;
(viii) each real property lease or sublease listed in Section
4.9(e) of the Disclosure Schedule that requires payments by or to
the Company or any Mainland Subsidiary in excess of One Hundred
Thousand Dollars ($100,000.00) during any one year;
(ix) each intellectual property license or sublicensor
agreement that requires payments by or to the Company or any
Mainland Subsidiary in excess of One Hundred Thousand Dollars
($100,000.00) during any one year;
(x) each tax allocation or tax sharing agreement listed in
Section 4.15(f) of the Disclosure Schedule; and
(xi) each collective bargaining agreement or other contract
or agreement between the Company or any of the Mainland Subsidiaries
and a union or other groups of employers.
(b) Except as disclosed in Section 4.8(b) of the Disclosure
Schedule:
(i) neither the Company nor any Mainland Subsidiary party to
any Material Contract, nor, to the Knowledge of Seller, any other
party thereto, is in breach thereof or default thereunder. Neither
the Company, any Mainland Subsidiary nor any other party to a
12
Material Contract has given written notice of breach or default
under a Material Contract to any other party thereunder; and
(ii) each Material Contract is valid and binding on and in
full force and effect with respect to, the Company or a Mainland
Subsidiary and, to the Knowledge of Seller, each respective
counterparty thereto, subject to general principles of equity and
except as the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws of
general application relating to creditors' rights; and
(iii) to the Knowledge of Seller, no event has occurred or
circumstance exists that (with or without notice or lapse of time)
may contravene, conflict with or result in a violation or breach of,
or give the Company or any of the Mainland Subsidiaries or any other
Person the right to declare a default or exercise any remedy under,
or to accelerate the maturity or performance of, or to cancel,
terminate or modify any Material Contract. There are no
renegotiations or, to the Knowledge of Seller, outstanding rights to
negotiate any amount to be paid or payable to or by the Company or
any of the Mainland Subsidiaries under any Material Contract other
than with respect to non-material amounts in the ordinary course of
business, and no Person has made a written demand for such
negotiations. Neither the Company nor any of the Mainland
Subsidiaries has released or waived any of its rights under any
Material Contract.
4.9. REAL PROPERTY; LEASES.
(a) Section 4.9(a) of the Disclosure Schedule sets forth a
complete and accurate list of the locations of all real property owned and
leased by the Company or any of its Mainland Subsidiaries (collectively
with all improvements located thereon and appurtenances thereto, the "Real
Property").
(b) Section 4.9(b) of the Disclosure Schedule identifies by street
address all real property owned by the Company or any of the Mainland
Subsidiaries, and which Person holds fee simple title to each Real
Property. The Company or one of the Mainland Subsidiaries has good and
marketable fee simple title to each parcel of the owned Real Property.
Except as set forth in Section 4.9(e) of the Disclosure Schedule, the
owned Real Property is not subject to any leases or tenancies of any kind
and constitutes all real property and improvements owned by the Company
and the Mainland Subsidiaries.
(c) All leased Real Property is leased to the Company or one of
the Mainland Subsidiaries pursuant to written leases, complete and
accurate copies of which have been previously been made available to
Purchaser. The Company or one of the Mainland Subsidiaries has a valid
leasehold interest in each leased Real Property. Except as set forth in
Section 4.9(e) of the Disclosure Schedule, the leased Real Property is not
subject to any leases or tenancies of any kind, except for the Company's
and the Mainland Subsidiaries' leases, the Company or the Mainland
Subsidiaries (as applicable) do not share any space with or sublet any
space to any other Person and enjoy peaceful and quiet possession of the
leased Real Property, subject to the terms of the applicable written lease
agreements. All options in favor of the Company or one of the Mainland
Subsidiaries to purchase any of the leased Real Property, if any, are in
full force and effect. The leased Real Property constitutes all real
13
property and improvements leased by the Company and the Mainland
Subsidiaries. All of the rental and other payments payable under each Real
Property lease by the Company or a Mainland Subsidiary are current, there
is no default under such Real Property lease either by the tenant or, to
Seller's Knowledge, the landlord thereunder, and no event has occurred
which, with the lapse of time or the giving of notice or both, would
constitute a default by the tenant, or, to Seller's Knowledge, the
landlord thereunder.
(d) Except as set forth in Section 4.9(d) of the Disclosure
Schedule, no portion of the Real Property is subject to any order to be
sold or is being condemned, expropriated or otherwise taken by any
Governmental Authority with or without payment or compensation therefor,
nor, to the Knowledge of Seller, has any such condemnation, expropriation
or taking been threatened or proposed. Except as set forth in Section
4.9(d) of the Disclosure Schedule, there are no pending or, to the
Knowledge of Seller, threatened condemnation proceedings, lawsuits, or
administrative actions relating to any of the Real Property.
(e) Except as described in Section 4.9(e) of the Disclosure
Schedule, neither the Company nor any of the Mainland Subsidiaries has
entered into any contract, agreement or arrangement (including, without
limitation any, options, rights of first offer, rights of first refusal to
purchase such Real Property or any portion thereof) granting to any person
the right to purchase, use or occupancy of any portion of the Real
Property.
(f) The owned Real Property is not in the possession of any
adverse possessors. The use of the owned Real Property for the normal
operations of the Business is consistent with and permitted by applicable
zoning ordinances and other laws or regulations in all material respects.
The use of the owned Real Property for the normal operations of the
Business does not require any special use approvals or permits or any
other permits that are not currently maintained by the Company or the
applicable Mainland Subsidiary, other than any such special use approvals
or permits or any other permits the absence of which would not have a
Seller Material Adverse Effect. The owned Real Property is served by all
water, sewer, electrical, telephone, drainage and other utilities required
for normal operations of the Business. Since November 20, 2003, neither
Seller, the Company nor any Mainland Subsidiary has received from any
governmental authority written notice of any material violation of any Law
relating to the Real Property that remains unresolved.
(g) There are no claims for fees, commissions or other payments
due to any brokers, agents or other Persons in connection with any of the
Real Property.
(h) There are no latent defects or adverse physical conditions
affecting the Real Property except for such defects or conditions that in
the aggregate would not reasonably be expected to have a Seller Material
Adverse Effect. All structures and buildings on the Real Property are
adequately maintained and are in good operating condition and repair for
the requirements of the business of the Companies and the Mainland
Subsidiaries as currently conducted except where the failure to maintain
such structures and buildings would not reasonably be expected to have a
Seller Material Adverse Effect.
14
4.10. INTELLECTUAL PROPERTY.
(a) Section 4.10 of the Disclosure Schedule sets forth a true and
complete list of all (A) (i) Patents, (ii) registered Marks, common law
Marks necessary to carry out the Company's and Mainland Subsidiaries'
current activities, and applications therefor, and (iii) registered
Copyrights and (B) Material Software owned by the Company or a Mainland
Subsidiary, and lists all material agreements and licenses with respect to
such Intellectual Property, other than "clickwrap", "shrinkwrap" or
similar non-negotiable agreements or agreements contained in or pertaining
to "off-the-shelf" software, or the terms of use or service for any
website.
(b) The Company or one of the Mainland Subsidiaries (as indicated
in Section 4.10 of the Disclosure Schedule) is the owner of all of the
Intellectual Property or, to the Knowledge of Seller, has all rights in
the Intellectual Property necessary and sufficient to carry out the
Company's and Mainland Subsidiaries' current activities (and had all
rights necessary to carry out its former activities at the time such
activities were being conducted), including to the extent required to
carry out such activities, rights to make, use, reproduce, modify, adapt,
create derivative works based on, translate, distribute (directly and
indirectly), transmit, display and perform publicly, license, rent and
lease and, as applicable, assign and sell, the Intellectual Property in
any jurisdiction in which the Company or Mainland Subsidiaries conducts
business as of the Closing Date.
(c) Except with respect to common law trademarks and service
marks, each owner listed on the Disclosure Schedule is listed in the
records of the appropriate governmental entity as the sole owner of record
of the registered Patents, Marks and registered Copyrights. Each copyright
registration, patent and registered trademark and application therefor
listed on the Disclosure Schedule is in proper form and has been duly
maintained, including the submission of all necessary filings in
accordance with the legal and administrative requirements of the
appropriate jurisdictions.
(d) To the Knowledge of Seller, the conduct of the Company's and
the Mainland Subsidiaries' Business and the exercise of their respective
rights relating to the Intellectual Property does not infringe upon,
misappropriate or otherwise violate any Intellectual Property Rights of
any Person anywhere in the United States or Canada. Except as set forth in
Section 4.10 of the Disclosure Schedule, neither the Company nor any of
the Mainland Subsidiaries has received written notice of any claims since
January 1, 2005, and, to Seller's Knowledge, there are no pending claims
of any Persons relating to the scope, ownership or use of any of the
Intellectual Property or the infringement, misappropriation or violation
of any Intellectual Property Rights of any Person anywhere in the world.
To the Knowledge of Seller, neither the Company nor any Mainland
Subsidiary infringes upon or unlawfully uses any intellectual property
owned by another Person. To Seller's Knowledge, no Person is infringing
upon, misappropriating or otherwise violating any of the Intellectual
Property. Neither the Company nor any of the Mainland Subsidiaries has
asserted a claim of infringement or misappropriation against any Persons
relating to the Intellectual Property since November 20, 2003.
15
(e) All personnel (including employees, agents, consultants and
contractors), who have contributed to or participated in the conception
and/or development of any Intellectual Property on behalf of Company or
any Mainland Subsidiary since November 20, 2003 have executed valid and
appropriate nondisclosure and assignment agreements and either: (i) have
been a party to a "work-for-hire" and/or other arrangement or agreements
with Company or any Mainland Subsidiary in accordance with applicable Law
that has accorded Company or any Mainland Subsidiary full, effective,
exclusive and original ownership of all tangible and intangible property
and Intellectual Property Rights thereby arising or relating thereto; or
(ii) have executed appropriate instruments of assignment in favor of
Company or any Mainland Subsidiary as assignee that have conveyed to
Company or any Mainland Subsidiary effective and exclusive ownership of
all tangible and intangible property and Intellectual Property Rights
thereby arising and related thereto.
(f) Except as set forth in Section 4.10(f) of the Disclosure
Schedule, the Company or any Mainland Subsidiary is not, nor as a result
of the execution or delivery of this Agreement, or performance of
Company's or any Mainland Subsidiary's obligations hereunder, will Company
or any Mainland Subsidiary be, in violation of any license, sublicense,
agreement or instrument relating to the Intellectual Property to which
Company or any Mainland Subsidiary is a party, nor will execution or
delivery of this Agreement, or performance of Seller's obligations
hereunder, cause the diminution, termination or forfeiture of any
Intellectual Property or any Intellectual Property Rights therein or
thereto.
4.11. LITIGATION, CLAIMS AND PROCEEDINGS. Except as set forth in Section
4.11 of the Disclosure Schedule, there are no actions that have been brought by
or against any Governmental Authority or any other Person pending or, to the
Knowledge of Seller, threatened, against or by the Company or any Mainland
Subsidiary or any of their properties, assets or businesses. Except as set forth
in Section 4.11 of the Disclosure Schedule, there are no existing Governmental
Orders naming the Company or any Mainland Subsidiary as an affected party.
4.12. ENVIRONMENTAL AND SAFETY AND HEALTH MATTERS. Except as disclosed in
Section 4.12 of the Disclosure Schedule:
(a) The Company and the Mainland Subsidiaries have obtained and
are in compliance in all material respects with all Permits that are
required under any Environmental Law for the operation of their businesses
as currently being conducted. All such Permits are valid and in full force
and effect and no circumstances exist which could cause any such Permit to
be revoked, modified or rendered non-renewable upon payment of the permit
fee. Complete copies of the Company's and the Mainland Subsidiaries'
environmental Permits have been made available to Purchaser.
(b) Each of the Company and the Mainland Subsidiaries and the Real
Property is in compliance in all material respects with all applicable
Environmental Laws. Neither the Company nor any of the Mainland
Subsidiaries has received any communication alleging that the Company or
any of the Mainland Subsidiaries is not, or since November 20, 2003 was
not, in compliance with any applicable Environmental Laws and
environmental Permits. To the Knowledge of Seller, no fact or circumstance
exists which would reasonably be expected to involve the Company or any of
16
the Mainland Subsidiaries in any environmental litigation, or impose any
material environmental liability.
(c) To the Knowledge of Seller, neither the Company nor any
Mainland Subsidiary has had a disposal or release of any Hazardous
Substances on, under, in, from or about the Real Property.
(d) To the Knowledge of Seller, neither the Company nor any
Mainland Subsidiary has disposed or arranged for the disposal of Hazardous
Substances on any third party property in violation of any Environmental
Law.
(e) To the Knowledge of Seller, neither the Company nor any
Mainland Subsidiary has received any written notice, demand, letter, claim
or request for information relating to the Real Property alleging
violation of or liability under any Environmental Law and neither the
Company nor Mainland Subsidiary is party to any written proceedings,
actions, orders, decrees or injunctions alleging material liability under
any Environmental Law, except as set forth in Section 4.12 of the
Disclosure Schedule.
(f) No Real Property is currently listed on the National
Priorities List or the Comprehensive Environmental Response, Compensation
and Liability Information System, both promulgated under the CERCLA or any
comparable state list. Neither the Company nor any Mainland Subsidiary has
received any written notice from any Person with respect to any Real
Property of potential or actual liability or a written request for
information from any Person under or relating to CERCLA or any comparable
state or local law.
(g) Except as set forth in Section 4.12(g) of the Disclosure
Schedule, there are no, and have not been any, Hazardous Substances used,
generated, treated, stored, transported, disposed of, handled or otherwise
existing on, under or about any Real Property in violation of
Environmental Laws or as would result in material liabilities or response
obligations under Environmental Laws. To the Knowledge of Seller, there
are no underground or above-ground storage tanks located on any Real
Property. To the Knowledge of Seller, all underground or above-ground
storage tanks previously located at any Real Property and not present
thereat as of the date hereof were removed in accordance with all
Environmental Laws.
4.13. COMPLIANCE WITH LAW; PERMITS. Except as disclosed in Section 4.13 of
the Disclosure Schedule, since November 20, 2003, the Business of the Company
and the Mainland Subsidiaries has been conducted in compliance in all material
respects with all Laws and Governmental Orders applicable to the Company and the
Mainland Subsidiaries. Except as disclosed in Section 4.13 of the Disclosure
Schedule, since November 20, 2003, neither the Company nor any Mainland
Subsidiary has received any written notice alleging any default or violation of
any Law or Governmental Order. As of the date hereof, the Company or a Mainland
Subsidiary has all material Permits, whether federal, state, provincial or
local, relating to the ownership and operation of the Business, the Company and
the Mainland Subsidiaries as the Business is presently conducted. As of the date
hereof, there has not been any actual, nor to Seller's Knowledge, is there any
pending, threat of loss of any Permit held or enjoyed by the Company or a
Mainland Subsidiary which loss has had or would reasonably be expected to have a
Seller Material Adverse Effect.
17
4.14. EMPLOYEE MATTERS AND BENEFIT PLANS.
(a) The Company and/or any of the Mainland Subsidiaries maintains,
contributes to, or has incurred any liability with respect to, only those
employee pension benefit plans (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or in
comparable legislation in Canada) for the benefit of employees of the
Company and the Mainland Subsidiaries that are described in Section
4.14(a) of the Disclosure Schedule ("Pension Plans").
(b) Neither the Company nor any of the Mainland Subsidiaries
maintains, contributes to or has incurred any liability with respect to, a
Multiemployer Plan (as defined in Section 3(37) of ERISA or in comparable
legislation in Canada) for the benefit of employees of the Company and the
Mainland Subsidiaries.
(c) The Company and/or any of the Mainland Subsidiaries maintains,
contributes to, or has incurred any liability with respect to, only those
employee welfare benefit plans (as defined in Section 3(1) of ERISA or in
comparable legislation in Canada) for the benefit of employees of the
Company and the Mainland Subsidiaries that are described in Section
4.14(c) of the Disclosure Schedule ("Welfare Plans").
(d) The Company and/or any of the Mainland Subsidiaries maintains,
contributes to, or has incurred any liability with respect to, only those
bonus, deferred compensation, stock option, stock appreciation rights
plans, incentive plans, severance pay plans, vacation pay plans or any
other arrangements for the benefit of employees of the Company and the
Mainland Subsidiaries that are described in Section 4.14(d) of the
Disclosure Schedule ("Other Benefit Plans" and, together with the Pension
Plans, Multiemployer Plans and Welfare Plans, the "Benefit Plans"). This
Section 4.14 shall not apply to the Spin-Off Plan described in Section
6.8(c) hereof. The Spin-Off Plan shall not be considered a Pension Plan or
Benefit Plan for purposes of this Section 4.14 or any other provision of
this Agreement. Neither the Company nor any of the Mainland Subsidiaries
contributes to or has incurred any liability with respect to any employee
pension benefit plan (as defined in Section 3(2) of ERISA), any
Multiemployer Plan (as defined in Section 3(37) of ERISA), any employee
welfare benefit plan (as defined in Section 3(1) of ERISA), any bonus
plan, deferred compensation plan, stock option plan, stock appreciation
rights plan, incentive plan, severance pay plan, vacation pay plan, or any
other arrangement for the benefit of employees established, maintained or
administered by Xxxxxxx, the Seller or any affiliate of Xxxxxxx other than
the Company or one of the Mainland Subsidiaries, as determined under Code
Section 414(b), (c), (m) or (o), other than the Benefit Plans.
(e) Each Benefit Plan complies in all material respects with the
applicable requirements of ERISA, the Code and any other applicable law
governing such Benefit Plan, and each Benefit Plan has at all times been
properly administered in all material respects in accordance with all such
requirements of law, and in accordance with its terms and the terms of any
applicable collective bargaining agreement to the extent consistent with
all such requirements of law. Each Benefit Plan which is intended to be
qualified is qualified under Code section 401(a), has received a favorable
determination or opinion letter from the Internal Revenue Service ("IRS")
stating that such Benefit Plan meets the requirements of Code section
401(a) and that the trust associated with such Benefit Plan is tax-exempt
18
under Code section 501(a) and, to the Knowledge of Seller, no event has
occurred which would jeopardize the qualified status of any such plan or
the tax exempt status of any such trust under Sections 401(a) and 501(a)
of the Code, respectively, or under comparable Canadian Law. No lawsuits,
claims or complaints to, or by, any person or governmental entity have
been filed or are pending and, to the Knowledge of the Seller, there are
no facts or contemplated events which could be expected to give rise to
any such lawsuit, claim (other than routine claims for benefits) or
complaint with respect to any Benefit Plan. Except as set forth in Section
4.14(e) of the Disclosure Schedule, there currently are no audits by any
governmental agency with respect to any Benefit Plan. The Company and the
Mainland Subsidiaries have no liabilities, obligations or commitments with
respect to any audit of any Benefit Plan, and there has been no
notification or communication by any governmental authority that an audit
or request for information is pending. Without limiting the foregoing, the
following are true with respect to each Benefit Plan:
(i) the Company and/or any Mainland Subsidiary has filed or
caused to be filed every material return, report statement, notice,
declaration and other document required by any law or governmental
agency, federal, state, provincial and local (including, without
limitation, the IRS and the Department of Labor) with respect to
each such Benefit Plan, each of such filings has been complete and
accurate in all material respects and neither the Company nor any
Mainland Subsidiary has incurred any material liability in
connection with such filings;
(ii) the Company and/or any Mainland Subsidiary has delivered
or caused to be delivered to every participant, beneficiary and
other party entitled to such material under the Code, ERISA or other
applicable Law, all material plan descriptions, returns, reports,
schedules, notices, statements and similar materials, including,
without limitation, summary plan descriptions and summary annual
reports, as are required under Title I of ERISA, the Code, or other
such Law, to be delivered, and neither the Company nor any Mainland
Subsidiary has incurred any material liability in connection with
such requirements;
(iii) neither the Company nor any Mainland Subsidiary is
delinquent in making contributions or payments to or in respect of
any Benefit Plan as to which the Company or any Mainland Subsidiary
is obligated to make contributions or payments (without regard to
any waiver granted by the IRS under Code section 412). All
contributions and payments (including salary deferral contributions
elected by employees) with respect to Benefit Plans that are due and
owing or required to be made by the Company or any Mainland
Subsidiary with respect to periods ending on or before the Closing
Date (including periods from the first day of the current plan year
or policy year to the Closing Date) have been, or will be, made
before the Closing Date in accordance with the appropriate plan
document, actuarial report, collective bargaining agreements or
insurance contracts or arrangements or as otherwise required by
ERISA or the Code;
(iv) with respect to each such Benefit Plan, to the extent
applicable (and to the extent available), the Seller has delivered
or made available in the Intralinks Data Site entitled Project Spurs
to the Purchaser true and complete copies of (a) all plan documents,
or any and all other documents that establish the existence of the
19
plan, trust, arrangement, contract, policy or commitment and all
amendments thereto, (b) the most recent determination or opinion
letter, if any, received from the IRS and the application (if
required) filed with respect thereto, (c) the three (3) most recent
Form 5500 Annual Reports (and all schedules and reports relating
thereto) and actuarial reports, and (d) all related trust
agreements, insurance contracts or other funding agreements that
implement each such Benefit Plan; and
(v) except as set forth in Section 4.14 of the Disclosure
Schedule, each Benefit Plan that is a "group health plan" (as
defined in ERISA section 607(1) or Code section 5001(b)(1)) has been
operated at all times in compliance in all material respects with
COBRA and the Health Insurance Portability and Accountability Act of
1996 and any related regulation or applicable similar state law.
(f) Except as required by Section 4980B of the Code, Part 6 of
Subtitle B of Title I of ERISA, or applicable state law, or as set forth
in Section 4.14(f) of the Disclosure Schedule, neither the Company nor any
Mainland Subsidiary has promised any former employee or other individual
not employed by the Company or any Mainland Subsidiary medical or life
insurance coverage. Neither the Company nor any Mainland Subsidiary
maintains or contributes to any plan or arrangement providing medical or
life insurance benefits to former employees or their dependents, other
than benefits provided in the event of disability and conversion
privileges.
(g) With respect to each Benefit Plan, there has not occurred, and
no person or entity is contractually bound to enter into, any material
"prohibited transaction" within the meaning of Section 4975(c) of the Code
or Section 406 of ERISA, which transaction is not exempt under Section
4975(d) of the Code or Section 408 of ERISA.
(h) There has not been any "Reportable Event," as described in
Section 4043 of ERISA, with respect to any Benefit Plan (other than such
events for which the thirty (30) day notification period has been waived
by the Pension Benefit Guaranty Corporation ("PBGC")) subject to Title IV
of ERISA.
(i) Neither the Company nor any Mainland Subsidiary has incurred
(i) any liability to the PBGC or to a trust (for plan terminations
instituted prior to December 18, 1987) described in Section 4049 of ERISA
(prior to its repeal), (ii) any multiemployer plan (as defined in Section
4001(a)(3) of ERISA ("Multiemployer Plan")) withdrawal liability (and no
event has occurred which, with the giving of the notice under Section 4219
of ERISA, would result in such liability) under Section 4201 of ERISA as a
result of a complete or partial withdrawal (within the meaning of Sections
4203 or 4205 of ERISA, respectively) from, or on behalf of, a
Multiemployer Plan, or (iii) any other liability under Title IV of ERISA.
(j) Neither the Company nor any Mainland Subsidiary or any
organization which is a successor or parent corporation of such entities,
within the meaning of ERISA Section 4069(b), has engaged in a transaction
described in ERISA Section 4069.
(k) The value of the assets of each Benefit Plan subject to Title
IV of ERISA (other than a Multiemployer Plan) equal or exceed the present
value of "Benefit Liabilities" (as defined in Section 4001(a)(16) of
20
ERISA) of each such Benefit Plan as of the last day of the plan year most
recently ended using PBGC termination actuarial assumptions currently in
effect or other actuarial assumptions certified by the Benefit Plan's
actuary as reasonable for purposes of a standard termination (as described
in 4041(b) of ERISA) with respect to any defined benefit Pension Plan.
(l) With respect to each Benefit Plan maintained by the Company or
any Mainland Subsidiary, such plan permits the plan sponsor to amend or
terminate the plan at any time and without any liability, subject to the
applicable requirements of ERISA and the Code for plan termination.
(m) No assets of, and no assets managed by, the Company or any
Mainland Subsidiary constitute "plan assets" as defined in 29 C.F.R.
Section 2510.3-101, and none of the transactions contemplated by this
Agreement (including those transactions occurring after the Closing) will
constitute a "prohibited transaction" within the meaning of Section
4975(c) of the Code or Section 406 of ERISA, which transaction is not
exempt under Section 4975(d) of the Code or Section 408 of ERISA.
(n) Except as set forth in Section 4.14(n) of the Disclosure
Schedule, the consummation of the transactions contemplated by this
Agreement will not: (i) entitle any current of former employee of the
Company to severance pay, unemployment compensation or any similar
payment; (ii) accelerate the time of payment or vesting, or increase the
amount of any compensation due to, or in respect of, any current or former
employee of the Company; or (iii) result in or satisfy a condition to the
payment of compensation that would, in combination with any other payment,
result in an "excess parachute payment" within the meaning of Section
280(G) of the Code.
(o) Each Benefit Plan that is a nonqualified deferred compensation
plan (as defined under Section 409A of the Code) has been operated and
administered in good faith compliance with Section 409A of the Code from
the period beginning January 1, 2005, through the date hereof.
4.15. TAXES.
(a) The Company and each of the Mainland Subsidiaries has filed
all Tax Returns that it was required to file, and has paid all Taxes shown
thereon as owing or will pay such Taxes by the due date thereof, except
where the failure to file a Tax Return would not have a Seller Material
Adverse Effect. All such Tax Returns are true, correct and complete in all
material respects, and there is no position taken on any Tax Return with
respect to any material income, material properties or material operations
of the Company or any Mainland Subsidiary for which there is not
substantial authority within the meaning of Section 6662 of the Code.
Except as set forth in Section 4.15(a) of the Disclosure Schedule, there
are no extensions of time to file any Tax Return of the Company or any
Mainland Subsidiary that are pending. True and correct copies of all
federal, state, provincial and local income Tax Returns filed by the
Company and any Mainland Subsidiary for all periods ending after November
20, 2003, have been heretofore made available to Purchaser. Seller has
made available to Purchaser true, correct and complete copies of all other
material Tax Returns and other reports and statements made or received by
or on behalf of the Company or any Mainland Subsidiary that relate to
Taxes arising during such periods, including, without limitation, income
21
tax audit reports, statements of income or gross receipts taxes, franchise
tax, sales tax and transfer tax received by or on behalf of the Company or
any Mainland Subsidiary.
(b) The unpaid Taxes of the Company or any of the Mainland
Subsidiaries did not, as of the date of the Reference Balance Sheet,
exceed the accrual for Tax liability (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax
income) set forth on the Reference Balance Sheet.
(c) There are no liens for Taxes upon the assets of the Company or
any of the Mainland Subsidiaries except for Permitted Encumbrances. Except
as set forth in Section 4.15 of the Disclosure Schedule, there is no
outstanding audit or other matter in controversy with respect to Taxes due
and owing by the Company or any of the Mainland Subsidiaries or in respect
of the income, properties or operations of the Company or any of the
Mainland Subsidiaries. There is no tax deficiency or claim assessed,
proposed or threatened in writing, with respect to the Company or any of
the Mainland Subsidiaries or the income, properties or operations of the
Company or any of the Mainland Subsidiaries, other than in respect of
audits, controversies, deficiencies, assessments or proposed adjustments
that are being contested in good faith, for which adequate reserves have
been established in accordance with GAAP and which are set forth in
Section 4.15 of the Disclosure Schedule.
(d) Neither the Company nor any of the Mainland Subsidiaries (i)
has waived any statutory period of limitations for the assessment of any
Taxes or agreed to any extension of time with respect to a Tax assessment
or deficiency other than in the case of any such waivers or extensions in
respect of an assessment or deficiency of Tax the liability of which has
been satisfied or settled, or (ii) has distributed the stock of any
corporation in a distribution qualifying under Section 355 of the Code in
the preceding two years;
(e) No claim has been made or threatened for any taxable year
which remains open by a Taxing Authority in a jurisdiction where the
Company or any of the Mainland Subsidiaries does not file Tax Returns that
the Company or any of the Mainland Subsidiaries is or may be subject to
taxation in such jurisdiction.
(f) None of the Company or any Mainland Subsidiary is a party to
any Tax allocation or sharing agreement providing for sharing of
consolidated tax liability of Seller's Affiliated Group, except as set
forth in Section 4.15 of the Disclosure Schedule. Any Tax sharing (or
similar) agreement as set forth in Section 4.15 of the Disclosure Schedule
will be terminated as of the Closing Date, and will thereafter have no
further effect for any taxable year (whether the current year, a future
year, or a past year). Any payments required by any such Tax sharing
agreement will be made at or prior to the termination thereof.
(g) None of the Seller, Company or any of the Mainland
Subsidiaries is a "foreign person" for purposes of Section 1445 of the
Code, except as set forth in Section 4.15 of the Disclosure Schedule.
(h) None of the Company or any of the Mainland Subsidiaries has
been a United States real property holding corporation within the meaning
of Code Section 897(c)(2) during the applicable period specified in Code
22
Section 897(c)(1)(A)(ii), except as set forth in Section 4.15 of the
Disclosure Schedule.
(i) None of the Company or any of the Mainland Subsidiaries has
any liability for the Taxes of any Person (other than with respect to the
Seller Consolidated Group) under Treas. Reg. Section 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or
successor, by contract or otherwise.
(j) Except with respect to any Affiliated Group of which Seller,
its parent or the Company is the common parent, the Company has not been a
member of an Affiliated Group.
(k) Each of the Company and the Mainland Subsidiaries has withheld
and/or paid all material Taxes required to have been withheld and/or paid
in connection with amounts paid or owed to any employee, independent
contractor, creditor, stockholder, member or other third party, except as
set forth in Section 4.15 of the Disclosure Schedule.
(l) None of the assets of the Company or the Mainland Subsidiaries
(i) are required to be treated as being owned by any other Person pursuant
to the so called safe harbor lease provisions of former Section 168(f)(8)
of the Code, (ii) secure any debt the interest on which is tax exempt
under Section 103(a) of the Code, (iii) are tax exempt use property within
the meaning of Section 168(h) of the Code, (iv) are subject to a 467
rental agreement as defined in Section 467 of the Code, or (v) constitute
an "amortizable Section 197 intangible" within the meaning of Section
197(c) of the Code that is not amortizable by reason of having been
acquired pursuant to the nonrecognition transactions described in Section
197(f)(2)(b) of the Code or the anti churning rules of Section 197(f)(9)
of the Code and the Treasury Regulations thereunder.
(m) Neither the Company nor any of the Mainland Subsidiaries will
be required to include any item of income in, or exclude any item of
deduction from, taxable income for any taxable period (or portion thereof)
ending after the Closing Date as a result of any (i) change in method of
accounting for a taxable period ending on or prior to the Closing Date
under Code Section 481(c) (or any corresponding or similar provision of
state, provincial, local or foreign income Tax law); (ii) "closing
agreement" as described in Code Section 7121 (or any corresponding or
similar provision of state, provincial, local or foreign income Tax law)
entered into on or prior to the Closing Date; or (iii) installment sale
made on or prior to the Closing Date.
(n) Neither the Company nor any of the Mainland Subsidiaries has
made any payments, nor is it obligated to make any payments, nor it is a
party to any agreement that could obligate it to make any payments that
will not be deductible under Code Section 280G or any comparable provision
of foreign income tax law for any period beginning on or after the Closing
Date.
(o) Except as otherwise set forth in Section 4.15 of the
Disclosure Schedule, (i) neither the Company nor any of the Mainland
Subsidiaries owns any real property in any jurisdiction in which a Tax is
imposed upon the transfer of securities of an issuer having an interest in
real property; (ii) neither the Company nor any of the Mainland
Subsidiaries is a party or subject to any joint venture, partnership or
other arrangement or contract that could be treated as a partnership for
23
federal income tax purposes; (iii) neither the Company nor any of the
Mainland Subsidiaries has participated in any "reportable transaction" or
acted as a "material advisor" with respect thereto, as such terms are
defined, in the case of "reportable transaction" in the Treasury
Regulations under Code Sections 6011 and 6112, and in the case of
"material advisor," as defined in Code Section 6111.
(p) Section 4.15(p) of the Disclosure Schedule sets forth an
accurate list of all states, provinces, counties, cities and other taxing
jurisdictions (whether foreign or domestic) with which the Company or any
of the Mainland Subsidiaries has filed income tax returns or income tax
reports.
(q) Section 4.15(q) of the Disclosure Schedule lists each
Subsidiary for which an election has been made pursuant to Section 7701 of
the Code and Treasury Regulations thereunder to be treated as other than
its default classification for U.S. federal income tax purposes, and
except to the extent set forth in such schedule, each foreign Subsidiary
will be classified for U.S. federal income tax purposes according to its
default classification.
(r) Neither the Company nor any of its Mainland Subsidiaries will
be required to include any item of income in taxable income for any
taxable period (or portion thereof) beginning after the date hereof
attributable to the amount of any intercompany transaction or excess loss
account described in Treasury Regulations under Section 1502 of the Code
(or any corresponding or similar provision of state, local or foreign
income tax law) existing at any time at or prior to the Closing.
(s) The Affiliated Group of which Xxxxxxx is the common parent has
filed all Tax Returns that it was required to file (excluding any Tax
Returns which are the subject of a valid extension of time to file) for
each taxable period during which the Company was a member of that
Affiliated Group, and has paid all Taxes shown thereon as owing or will
pay such Taxes by the due date thereof, except where a failure to file or
pay such Taxes would not reasonably be expected to have a Seller Material
Adverse Effect.
(t) For purposes of this Section 4.15 and Article 10, any
reference to "Company" or "Mainland Subsidiary" shall include any
predecessor entity thereto.
4.16. ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in Section
4.16 of the Disclosure Schedule, and except for liabilities or obligations which
(i) are reflected in, accrued, reserved against or otherwise described in the
Reference Balance Sheet (or reflected in the notes thereto), (ii) were incurred
after the date of the Reference Balance Sheet in the ordinary course of business
and consistent with past practices or in connection with the transactions
contemplated by this Agreement, (iii) are liabilities or obligations arising
under contracts or agreements of the Company and the Mainland Subsidiaries not
required to be reflected as liabilities on a balance sheet prepared in
accordance with GAAP, or (iv) are being paid or satisfied at Closing in
accordance with the terms hereof, neither the Company nor any Mainland
Subsidiary has any material liabilities or obligations of any nature whatsoever.
4.17. ABSENCE OF CERTAIN CHANGES. Except as (a) disclosed on the Reference
Balance Sheet; (b) disclosed in Section 4.17 of the Disclosure Schedule; or (c)
contemplated by this Agreement, since the date of the Reference Balance Sheet,
neither the Company nor any Mainland Subsidiary has (i) split, combined or
24
reclassified its capital stock; (ii) materially changed its accounting
principles, practices or methods, except as required by GAAP or applicable Law,
(iii) declared or paid any dividend or other distribution of cash or other
assets or made any payments to Seller or its Affiliates (in each case, on a net
basis), except for participation in Seller's cash management program pursuant to
which cash collected by the Company is swept by Seller, which shall continue
until Closing; or (iv) suffered any change constituting a Seller Material
Adverse Effect.
4.18. LABOR MATTERS.
(a) Except as disclosed in Section 4.18(a) of the Disclosure
Schedule, neither the Company nor any Mainland Subsidiary is a party to
any collective bargaining agreement or other labor union contract. There
is no labor strike, slowdown or stoppage in progress or, to the Knowledge
of Seller, threatened, against or involving the Company or any Mainland
Subsidiary. Since November 20, 2003, neither the Company nor any Mainland
Subsidiary has experienced any labor strike, slowdown or stoppage. Seller
has no Knowledge of any material activities or proceedings of any labor
union to organize any employees of the Company or any Mainland Subsidiary.
Since November 20, 2003, except as set forth in Section 4.18(a) of the
Disclosure Schedule, there has been no request for collective bargaining
or for a representation election from any employee, union or the National
Labor Relations Board. To Seller's Knowledge, no event has occurred or
circumstances exist that could provide the basis for any work stoppage or
other labor dispute with respect to the Company or any of the Mainland
Subsidiaries. There is no lockout of any employees of the Company or any
of the Mainland Subsidiaries, and no such action is contemplated by the
Company or any of the Mainland Subsidiaries.
(b) To the Knowledge of Seller, no employee of the Company or any
of the Mainland Subsidiaries is a party to, or is otherwise bound by, any
agreement, including any confidentiality, non competition or proprietary
rights agreement, between such employee and the Company or any of the
Mainland Subsidiaries or, to Sellers' Knowledge, any other Person that
materially adversely affects or will affect the performance of that
employee's duties as an employee of the Company or any of the Mainland
Subsidiaries following the Closing. Except as set forth in Section 4.18(b)
of the Disclosure Schedule, to Seller's actual Knowledge, no key
employee(s) of the Company or any of the Mainland Subsidiaries intends to
terminate employment with the Company or any of the Mainland Subsidiaries
prior to or at the Closing.
(c) The Company and the Mainland Subsidiaries are in compliance in
all material respects with all Laws relating to the employment of labor,
including all such Laws relating to wages, hours, the WARN Act, collective
bargaining, discrimination, equal employment opportunity, immigration
control, safety and health, workers' compensation and the collection and
payment of withholding and/or social security taxes and any similar Tax.
There has been no "mass layoff" or "plant closing" (as defined in the WARN
Act) with respect to the Company or any of the Mainland Subsidiaries
within the six (6) months prior to the Closing. There is not presently
pending or, to Seller's Knowledge, overtly threatened any material charge,
grievance proceeding or other claim against or affecting the Company or
any of the Mainland Subsidiaries relating to the alleged violation of any
law pertaining to labor relations or employment matters, including any
25
charge or complaint filed by an employee or union with the National Labor
Relations Board, the Equal Employment Opportunity Commission or any
comparable governmental authority.
(d) Except as set forth in Section 4.18(d) of the Disclosure
Schedule, no employee of the Company or any of the Mainland Subsidiaries
has any claim against the Company or any of the Mainland Subsidiaries
(whether under law, any employment agreement or otherwise) on account of
or for: (A) overtime pay, other than overtime pay for the current payroll
period; (B) wages or salaries, other than wages or salaries for the
current payroll period; or (C) vacations, sick leave, time off or pay in
lieu of vacation, sick leave or time off, other than vacation, sick leave
or time off (or pay in lieu thereof) earned in the twelve month period
immediately prior to the date of this Agreement. The Company and the
Mainland Subsidiaries have made all required payments to the relevant
unemployment compensation reserve account with the appropriate
governmental departments with respect to their employees and such accounts
have positive balances.
(e) Section 4.18(e) of the Disclosure Schedule contains a true and
correct list of all employees of the Company and the Mainland Subsidiaries
as of the date of this Agreement whose annual compensation exceeds
$100,000, together with their respective base salaries, bonuses, and
positions. Section 4.18(e) of the Disclosure Schedule correctly states the
number of employees laid off by the Company and the Mainland Subsidiaries
in the 90 days preceding the date hereof. To Sellers' Knowledge, no
employee of the Company and the Mainland Subsidiaries is an undocumented
alien.
(f) The employment of each of the Company's and the Mainland
Subsidiaries' employees is terminable at will without cost to the Company
or any of the Mainland Subsidiaries except for payments required under the
Benefit Plans, the payment of accrued salaries or wages and vacation pay
and as set forth in the agreements listed in Section 4.8(a)(v) of the
Disclosure Schedule.
4.19. FINDER'S FEE. Except for fees payable to Citigroup Global Markets
Inc. payable by Xxxxxxx or Seller, neither Seller nor the Company has incurred
any liability to any party for any brokerage or finder's fee or agent's
commission, or the like, in connection with the transaction contemplated by this
Agreement based upon arrangements made by or on behalf of Seller or the Company.
4.20. ACCOUNTS RECEIVABLE. All of the Company's and the Mainland
Subsidiaries' trade accounts receivable, notes receivable, negotiable
instruments and chattel paper (the "Accounts Receivable") have arisen from bona
fide transactions in the ordinary course of business and, to the extent not
previously collected, are fully collectible, net of the allowance for doubtful
accounts, in the ordinary course of business in accordance with their terms and
assuming that the methods of collection practices and procedures used in
collection of the accounts receivable are consistent with those historically
used by the Company and the Mainland Subsidiaries. None of the Accounts
Receivable are subject to any material counterclaim or set off. All reserves,
allowances and discounts with respect to the Accounts Receivable were and are
adequate and consistent in extent with reserves, allowances and discounts
previously maintained by the Company and the Mainland Subsidiaries in the
ordinary course of business.
4.21. CUSTOMERS. Seller has made available to Purchaser at Seller's
operating locations the current and prior standard forms of rental management
agreements, homeowners' association agreements and condominium management
26
agreements that the Company and the Mainland Subsidiaries execute with their
customers. The Company and the Mainland Subsidiaries are not in breach,
violation or default under, and have not received written notice that they are
in breach, violation or default under, any of the terms, provisions or
conditions of the rental management agreements, homeowners' association
agreements and condominium management agreements, except for such breaches that,
considered in the aggregate, would not reasonably be expected to result in a
Seller Material Adverse Effect.
4.22. INSURANCE. Except for insurance policies with respect to Benefit
Plans, Section 4.22 of the Disclosure Schedule contains a true and correct list
and description (including insurer, coverages, deductibles, limits of liability
and expiration dates) of all insurance policies (including fire and casualty,
general liability, theft, worker's compensation, directors and officers,
business interruption and all other forms of property and casualty insurance),
which are owned by the Company or any of the Mainland Subsidiaries or which name
the Company or any of the Mainland Subsidiaries as an insured (or loss payee),
including, without limitation those which pertain to the Company's and the
Mainland Subsidiaries' respective assets, employees or operations. All such
insurance policies are in full force and effect. The policy limits of insurance
policies currently in effect covering assets, employees and operations of the
Company or the Mainland Subsidiaries have not been materially eroded by the
payment of claims or claim handling expenses.
4.23. BANK ACCOUNTS. Section 4.23 of the Disclosure Schedule contains a
list showing: (i) the name of each bank, safe deposit company or other financial
institution in which the Company or any of the Mainland Subsidiaries has an
account, lock box or safe deposit box; (ii) the names of all Persons authorized
to draw thereon or to have access thereto and the names of all Persons, if any,
holding powers of attorney from the Company or any of the Mainland Subsidiaries;
and (iii) all instruments or agreements to which the Company or any of the
Mainland Subsidiaries is a party as an endorser, surety or guarantor, other than
checks endorsed for collection or deposit in the ordinary course of business.
4.24. RELATED PARTIES TRANSACTIONS. Except as set forth in Section 4.24 of
the Disclosure Schedule, since November 20, 2003, neither the Company nor any of
the Mainland Subsidiaries has entered into any material agreements, contracts,
arrangements or other business relationships with any of the Company's and the
Mainland Subsidiaries' current directors, managers, officers, members,
shareholders, partners, and their respective Affiliates (the "Related Parties")
other than normal employment arrangements and Benefit Plans. Except as set forth
in Section 4.24 of the Disclosure Schedule, neither the Company nor any of the
Mainland Subsidiaries is owed or owes any material amount from or to the Related
Parties (excluding employee compensation and other ordinary incidents of
employment). Except as set forth in Section 4.24 of the Disclosure Schedule, no
property or interest in any material property which relates to and is necessary
or useful in the operation of the Business, is presently owned by or leased by
or to any Related Party.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
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5.1. CORPORATE STATUS. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and (a) has all requisite corporate power under the laws of its
jurisdiction of incorporation and authority to own, operate or lease all of its
properties and assets and to carry on its business as it is now being conducted,
and (b) is duly qualified to do business and is in good standing in each of the
jurisdictions in which the ownership, operation or leasing of its properties and
assets and the conduct of its business requires it to be so qualified, licensed
or authorized, except where the failure to have such power and authority or to
be so qualified, licensed or authorized would not reasonably be expected to have
a Purchaser Material Adverse Effect.
5.2. AUTHORITY. Purchaser has all requisite corporate power and authority
to enter into this Agreement and the Ancillary Agreements to which it is a party
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the Ancillary Agreements to which it is a party
by Purchaser and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the board of directors of Purchaser, and no
other corporate proceedings are necessary to authorize this Agreement and the
Ancillary Agreements or to consummate the transactions contemplated hereby or
thereby. This Agreement has been, and the Ancillary Agreements to which
Purchaser is a party that will be executed at Closing will be, duly executed and
delivered by Purchaser, and (assuming due authorization and delivery by Seller)
this Agreement constitutes, and the Ancillary Agreements to which Purchaser is a
party that will be executed at Closing will constitute, a legal, valid and
binding obligation of Purchaser, enforceable against it in accordance with its
terms, subject to general principles of equity and except as the enforceability
thereof may be limited by applicable bankruptcy, insolvency, reorganization or
other similar laws of general application relating to creditors' rights.
5.3. NO CONFLICT. Neither the execution, delivery and performance of this
Agreement by Purchaser nor the consummation by Purchaser of the transactions
contemplated hereby will (a) violate, conflict with or result in the breach of
any term or provision of the certificate of incorporation or bylaws of
Purchaser, (b) conflict with or violate, in any material respect, any Law
applicable to Purchaser or any of its assets, properties or business, or (c)
conflict with or violate, result in the breach of any term or provision of, or
constitute a default (or event which with the giving of notice or lapse of time,
or both, would become a default) under any material note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which Purchaser is a party or by which its properties or assets may be bound,
except, in each case for such conflicts, violations, breaches, defaults, rights
of termination, amendment, acceleration, suspension, revocation or cancellation
or creation of any Encumbrance which would not reasonably be expected to have a
Purchaser Material Adverse Effect.
5.4. COMPLIANCE WITH LAW. Purchaser has complied with and is not in
violation of applicable Laws or Governmental Orders which would affect its
ability to perform its obligations hereunder. There is no Action pending, or to
the Knowledge of Purchaser, threatened in writing against Purchaser, affecting
its ability to perform its obligations hereunder.
5.5. CONSENTS. No action, approval, consent or authorization by, or any
other order of, filing with or notification to any Governmental Authority, is or
will be necessary to make this Agreement or any of the agreements or instruments
to be executed, performed and delivered by Purchaser pursuant hereto a legal,
valid and binding obligation of Purchaser subject to general principles of
equity and except as the enforceability thereof may be limited by applicable
28
bankruptcy, insolvency, reorganization or other similar laws of general
application relating to creditors' rights, or to consummate the transactions
contemplated hereunder, except where the failure to obtain such actions,
approvals, consents or authorizations or orders of, or the failure to make such
filings or notifications, would not have a Purchaser Material Adverse Effect.
5.6. SUFFICIENT FUNDS. As of the date hereof Purchaser has, and as of the
Closing Purchaser will have, access to sufficient funds (through existing credit
arrangements or otherwise) to enable it to consummate the transactions
contemplated by this Agreement.
5.7. FINDER'S FEE. Purchaser has not done anything to cause Seller, the
Company, the Company's Mainland Subsidiaries or any of their respective
stockholders, option holders, directors, officers or other Affiliates to incur
any liability to any party for any brokerage or finder's fee or agent's
commission, or the like, in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Purchaser.
5.8. NO RELIANCE. Neither Seller, the Company nor any other Person has
made a representation or warranty to Purchaser with respect to (i) any
projections, estimates or budgets for the Company's or its Subsidiaries'
businesses, (ii) any material, documents or information relating to the Company
or any Subsidiary of the Company made available to Purchaser or its counsel,
accountants or advisors in Seller's Data Room (except as set forth in Sections
4.1 and 6.1(c)) or otherwise, except as expressly covered by a representation or
warranty set forth in this Agreement or the Disclosure Schedule hereto, or (iii)
the information contained in Seller's Confidential Information Memorandum dated
October 2006.
5.9. LITIGATION CLAIMS AND PROCEEDINGS. There are no (i) claims or
actions that have been brought by or against any Governmental Authority or any
other Person pending or, to the Knowledge of Purchaser, threatened in writing
against or by the Purchaser or any of its Subsidiaries or assets, or (ii)
existing Governmental Orders naming the Purchaser or any of its Subsidiaries as
an affected party, that may have a material adverse effect on, or otherwise
interfere with, the ability of Purchaser to perform its obligations under this
Agreement and any Ancillary Agreements or on the ability of Purchaser to
consummate the purchase of the Shares and the other transactions contemplated
hereby.
ARTICLE 6
COVENANTS
6.1. INTERIM OPERATIONS OF THE COMPANY. Seller and Xxxxxxx covenant and
agree that, after the date hereof and prior to the Effective Time or earlier
termination of this Agreement pursuant to its terms (unless Purchaser shall
otherwise approve in writing, which approval shall not be unreasonably withheld,
conditioned or delayed, or unless otherwise contemplated by this Agreement) or
disclosed in Section 6.1 of the Disclosure Schedule):
(a) the businesses of the Company and the Mainland Subsidiaries
shall be conducted in all material respects in the ordinary course
consistent with past practices (including with respect to the payment of
accounts payable and the collection of accounts receivable);
(b) the Company and the Mainland Subsidiaries shall not: (i) amend
their Articles of Incorporation or bylaws (or similar organization
documents), (ii) split, combine, subdivide or reclassify their outstanding
shares of capital stock (or similar equity interests); or (iii)
repurchase, redeem or otherwise acquire any shares of their capital stock
29
(or similar equity interests) or any securities convertible into their
capital stock (it being understood that this provision shall not prohibit
dividends of cash from the Company or the Mainland Subsidiaries or any
other entities in which the Company or its Subsidiaries has invested);
(c) except as required by applicable Law, the Company and the
Mainland Subsidiaries shall not (i) enter into, adopt or amend (except for
renewals on substantially identical terms) any agreement or arrangement
relating to severance payments (excluding any severance payments made
between the date of this Agreement and the Closing that are made in the
ordinary course of business and in strict accordance with the severance
policies posted in the Data Room or written arrangements in effect as of
the date of this Agreement); (ii) enter into, adopt or amend (except for
renewals on substantially identical terms) any employee benefit plan; or
(iii) enter into, adopt or amend (except for renewals on substantially
identical terms) any employment agreement, consulting agreement or any
agreement that provides for transaction bonuses, retention or stay
bonuses, change-in-control payments, severance payments and similar
payments or bonuses payable to any employee of the Company or any of the
Mainland Subsidiaries as a result of the consummation of the transactions
contemplated by this Agreement;
(d) the Company and the Mainland Subsidiaries shall not: (i) incur
or assume any long-term or short-term debt or issue any debt securities
except for borrowings under existing lines of credit or from Seller or its
Affiliates in the ordinary course of business consistent with past
practice (including participation in Seller's and its Affiliates' cash
management program); (ii) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person except in the ordinary and usual
course of business consistent with past practice in an amount not material
to the Company and the Mainland Subsidiaries, taken as a whole; (iii) make
any loans, advances or capital contributions to, or investments in, any
other person other than in the ordinary and usual course of business
consistent with past practice in an aggregate amount not material to the
Company and the Mainland Subsidiaries, taken as a whole (excluding
participation in Seller's and its Affiliates' cash management program);
(iv) Seller shall not pledge or otherwise encumber the Shares; or (v) the
Company and the Mainland Subsidiaries shall not mortgage or pledge any of
their assets or create any Encumbrance of any kind with respect to any
asset other than Permitted Encumbrances;
(e) the Company and the Mainland Subsidiaries shall not issue,
deliver, sell or encumber shares of any class of their capital stock (or
similar equity interests) or any securities convertible into, or any
rights, warrants or options to acquire, any such shares (or similar equity
interests);
(f) the Company and the Mainland Subsidiaries shall not acquire
any business, whether by merger, consolidation, the purchase of a
substantial portion of the assets of such business or otherwise;
(g) the Company and the Mainland Subsidiaries shall not amend any
lease relating to leased Real Property, enter into any material agreement
relating to the Real Property that would be binding upon Purchaser after
the Closing.
30
(h) the Company shall not materially change its accounting
policies, practices or methods except as required by GAAP or by the rules
and regulations of the United States Securities and Exchange Commission;
(i) the Company and the Mainland Subsidiaries shall not pay or
delay payment of accounts payable, or collect or accelerate collection of
accounts receivables, in each case other than in the ordinary course of
business consistent with past practices;
(j) the Company and the Mainland Subsidiaries shall not waive any
right or cancel or compromise any debt or claim other than in the ordinary
course of business consistent with past practices;
(k) the Company and the Mainland Subsidiaries shall not incur or
commit to incur any capital expenditures in excess of Fifty Thousand
Dollars ($50,000.00), or which is outside of the ordinary course of
business, consistent with past practice;
(l) the Company and the Mainland Subsidiaries shall not (i)
increase the bonus, salary or other compensation or fringe benefits
payable to any employee, without Purchaser's prior written consent, or
(ii) change the "at will" status of any employee;
(m) the Company and the Mainland Subsidiaries shall not hire any
employee who has an annual salary in excess of $100,000, or any employees
with aggregate annual salaries or wages in excess of $300,000, unless such
person is hired as a replacement for an employee who has left the Company
or any Mainland Subsidiary and such position, in the good faith judgment
of the Company, must be filled in the reasonable and good faith judgment
of the Company prior to the Closing; and
(n) the Company shall not enter into, or permit any of the
Mainland Subsidiaries to enter into, any commitments or agreements to do
any of the foregoing.
6.2. CONSENTS. Seller and Xxxxxxx shall use commercially reasonable
efforts and make every good faith attempt, and Purchaser shall cooperate with
Seller and Xxxxxxx, to cause the Company or the Mainland Subsidiaries (as the
case may be) to obtain all consents to the assignment of, or alternative
arrangements satisfactory to Purchaser with respect to, any Material Contract
required to be listed in Sections 4.3 and 4.4 of the Disclosure Schedule.
6.3. PUBLICITY. Subject to their respective legal obligations (including
requirements of stock exchanges, national stock markets and other similar
regulatory bodies), Seller and Xxxxxxx, on the one hand, and Purchaser, on the
other hand, shall consult with each other, and use reasonable efforts to agree
upon the text of any press release, before issuing any such press release or
otherwise making public statements with respect to the transactions contemplated
hereby and in making any filings with any federal, provincial or state
governmental or regulatory agency or with any national securities exchange or
national stock market with respect thereto.
6.4. ACCESS TO RECORDS AND PROPERTIES.
(a) From the date hereof until the Closing Date or earlier
termination of this Agreement, Seller and Xxxxxxx will, and will cause the
Company and the Mainland Subsidiaries to:
(i) provide Purchaser and its officers, counsel and other
representatives with reasonable access during normal business hours
to the operations of the Company and the Mainland Subsidiaries,
their principal personnel and representatives, and such books and
31
records pertaining to the Company and the Mainland Subsidiaries as
Purchaser may reasonably request, provided that (i) Purchaser agrees
that such access will give due regard to minimizing interference
with the operations, activities and employees of the Company and the
Mainland Subsidiaries, (ii) such access and disclosure would not
violate the terms of any agreement to which the Company or any of
the Mainland Subsidiaries is bound or any applicable Law and (iii)
all arrangements for access shall be made solely through Seller and
Xxxxxxx; and
(ii) furnish to Purchaser or its representatives such
additional financial and operating data and other information
relating to the Company and the Mainland Subsidiaries as may be
reasonably requested, to the extent that such access and disclosure
would not (i) violate the terms of any agreement to which the
Company or any of the Mainland Subsidiaries is bound or any
applicable Law, or (ii) cause significant competitive harm to the
Company or any of the Mainland Subsidiaries or their Affiliates if
the transactions contemplated by this Agreement are not consummated.
(b) Purchaser agrees that all information so received from Seller,
the Company and the Mainland Subsidiaries shall be deemed received
pursuant to the Confidentiality Agreement dated November 3, 2006 between
Xxxxxxx and Leucadia National Corporation (the "Confidentiality
Agreement") and that each shall, and shall cause its affiliates and each
of its and their representatives to, comply with the provisions of the
Confidentiality Agreement with respect to such information, and the
provisions of the Confidentiality Agreement are hereby incorporated herein
by reference with the same effect as if fully set forth in this Agreement.
6.5. FURTHER ACTION. Each of Xxxxxxx, Seller and Purchaser shall, subject
to the fulfillment at or before the Effective Time of each of the conditions of
performance set forth herein or the waiver thereof, use its reasonable efforts
to perform such further acts and execute such documents as may be reasonably
required to effect the transactions contemplated hereby. Each of Xxxxxxx, Seller
and Purchaser will comply in all material respects with all applicable laws and
with all applicable rules and regulations of any Governmental Authority in
connection with its execution, delivery and performance of this Agreement and
the transactions contemplated hereby. Each of Xxxxxxx, Seller and Purchaser
agrees to use its commercially reasonable efforts, and make every good faith
effort, to obtain in a timely manner all necessary waivers, consents, approvals
and opinions and to effect all necessary registrations and filings, and to use
its reasonable efforts to take, or cause to be taken, all other actions and to
do, or cause to be done, all other things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated hereby and to cause the conditions precedent to the closing
obligations of the parties set forth in Article 7 to be satisfied.
6.6. EXPENSES. Whether or not the transactions contemplated hereby are
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party hereto
incurring such expenses except as expressly provided herein; provided, however,
that Purchaser will be responsible for all fees and expenses incurred in
connection with obtaining the consent of Seller's independent accountants
pursuant to Section 4.6.
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6.7. NOTIFICATION OF CERTAIN MATTERS. Each party shall give prompt notice
to the other of the following:
(a) the occurrence or nonoccurrence of any event whose occurrence
or nonoccurrence is reasonably expected to cause any of the conditions
precedent set forth in Article 7 not to be satisfied; and
(b) the status of matters relating to completion of the
transactions contemplated hereby, including promptly furnishing the other
with copies of notices or other communications received by any party from
any Governmental Authority or other third party with respect to this
Agreement or the transactions contemplated hereby.
6.8. EMPLOYEE BENEFIT PLANS.
(a) From and after the Effective Time, Purchaser will cause the
Company and its Mainland Subsidiaries to continue and perform, in
accordance with their terms, the existing employment and severance
agreements between the Company or a Mainland Subsidiary of the Company and
any officer, director or employee of the Company or a Mainland Subsidiary
of the Company and all obligations of the Company or a Mainland Subsidiary
of the Company under the Benefit Plans sponsored by the Company or a
Mainland Subsidiary of the Company set forth in Section 6.8 of the
Disclosure Schedule. Nothing in this Section 6.8 shall be interpreted to
prohibit Purchaser, the Company or a Mainland Subsidiary of the Company
from establishing new plans or amending or terminating any Benefit Plan
sponsored by the Company or a Mainland Subsidiary of the Company in
accordance with the terms thereof.
(b) Following the Effective Time, the Company and the Mainland
Subsidiaries shall continue to employ each individual employed by the
Company or any of its Mainland Subsidiaries on the Closing Date (including
employees absent from work due to short-term disability, sick leave,
military leave or other employer-approved absences of short duration)
("Company Covered Employees"), other than persons listed on Section 6.8(b)
of the Disclosure Schedule. For purposes of determining eligibility and
vesting (but not for benefits accrual) under any Purchaser benefit plan in
which a Company Covered Employee participates after the Effective Time,
such employee shall be credited with his or her years of service with the
Company or a Mainland Subsidiary of the Company. To the extent that any
Purchaser benefit plan in which a Company Covered Employee participates
after the Effective Time provides medical, dental or vision benefits,
Purchaser shall cause all pre-existing condition exclusions and actively
at work requirements of such plan to be waived for such employee and his
or her covered dependents except to the extent such employee and his or
her covered dependents were subject to such requirements under the
applicable Benefit Plans, and Purchaser shall cause any eligible expenses
incurred by such employee on or before the Effective Time to be taken into
account under such plan for purposes of satisfying all deductible,
coinsurance and maximum out-of-pocket requirements applicable to such
employee and his or her covered dependents for the applicable plan year;
provided, however that Seller shall be responsible for administration and
payment of such claims. Seller shall be responsible and liable for
satisfying the continuation coverage requirements for group health plans
under the Consolidated Omnibus Reconciliation Act of 1985 and Sections 601
through 608 of ERISA (collectively, "COBRA") for all former employees of
33
the Company and its Mainland Subsidiaries (and their respective
beneficiaries and dependents) who are receiving COBRA continuation
coverage as of the Closing Date and for all former employees of the
Company and its Mainland Subsidiaries and Company Covered Employees (and
their respective beneficiaries and dependents) who are entitled to elect
such coverage on account of a qualifying event occurring on or before the
Closing Date.
(c) On or prior to the Closing Date, Seller shall establish for
the benefit of employees of the Company and its Mainland Subsidiaries a
defined contribution plan intended to be qualified under Section 401(a) of
the Code and an associated trust intended to be tax-exempt under Section
501(a) of the Code (the "Spin-Off Plan"). The Spin-Off Plan shall have
substantially the same terms as the Xxxxxxx Entertainment Company 401(k)
Savings Plan (the "GEC 401(k) Plan"). Purchaser and Seller shall cooperate
to cause the transfer of the aggregate individual account balances of the
Company Covered Employees (whether or not vested) from the GEC 401(k) Plan
to the Spin-Off Plan as soon as practicable after the Closing.
(d) In the event that (i) GEC makes payments under its
Supplemental Salary Deferral (SUDCOMP) plan to Company Covered Employees
that may be categorized as income reportable on Form W-2 during 2007 with
respect to such Company Covered Employees, or (ii) the Company Covered
Employees exercise options to acquire common stock of GEC that results in
income reportable on Form W-2 during 2007 with respect to such Company
Covered Employees, Purchaser will cooperate with Seller with respect to
reporting such amounts as required by applicable law on Forms W-2 prepared
by Purchaser.
(e) Xxxxxxx, Seller and Purchaser shall cooperate in taking any
and all reasonable actions necessary to implement the provisions in this
Section 6.8.
6.9. INTERCOMPANY INDEBTEDNESS. Immediately prior to the Closing, Seller
and its Affiliates shall contribute to the Company as a capital contribution in
respect of the Shares, all indebtedness owed by the Company or any of the
Mainland Subsidiaries to Seller that has not been repaid by the Company or the
Mainland Subsidiary prior to the Closing, if any. In addition, immediately prior
to the Closing, any indebtedness owed by Seller or its Affiliates (other than
the Company or any of its Subsidiaries) to the Company or any of its
Subsidiaries that has not been repaid by the Seller or its Affiliates prior to
the Closing, shall be satisfied.
6.10. DEBT AND GUARANTEES. At the Closing, Seller shall make provision for
the release of guaranties of the Company and its Mainland Subsidiaries listed in
Section 6.10 of the Disclosure Schedule under "Guarantees to be released at
Closing", and provide evidence reasonably satisfactory to Purchaser of such
release(s). Purchaser shall use commercially reasonable efforts to, or shall
cause one of its Affiliates to, be substituted for Seller and all of its
Affiliates other than the Company and its Mainland Subsidiaries as of the
Closing, without recourse to Seller or any such Affiliates, with respect to
Gaylord's guaranty obligations under the Guaranty dated December 30, 2004, by
Xxxxxxx and the Company for the benefit of B & B Properties, relating to the
Commercial Lease dated November 1, 1998, between Aspen Lodging Company, LLC and
B & B Properties (the "Credit Enhancement Obligation"). To the extent Purchaser
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cannot be substituted as guarantor thereunder, Purchaser shall fully indemnify
and promptly reimburse Seller and Xxxxxxx, in immediately available funds and
without offset for any amounts owing by Seller or its Affiliates to Purchaser,
for any obligations incurred by Xxxxxxx, Seller or their Affiliates with respect
to such Credit Enhancement Obligation that is not so released. After the
Closing, neither Seller nor any of its Affiliates shall have any obligation to
provide any guaranty, performance or credit support in respect of any other
obligations of the Company or any Mainland Subsidiary.
6.11. SUPPLEMENTS TO DISCLOSURE SCHEDULE. If Seller becomes aware of, or
there occurs after the date of this Agreement and prior to the Closing, any fact
or condition that constitutes a breach of any representation or warranty made by
Seller in Article 4 above that is qualified by materiality or Seller Material
Adverse Effect or a material breach of any representation or warranty made by
Seller in Article 4 above that is not so qualified, or if any fact or condition,
either currently existing or hereafter occurring, otherwise requires any change
in the Disclosure Schedule delivered to Purchaser at the time of execution of
this Agreement, Seller will deliver to Purchaser at or before the Closing a
supplement to the Disclosure Schedule (a "Disclosure Schedule Supplement")
specifying any needed change. The delivery of a Disclosure Schedule Supplement
shall not modify or affect in any manner any of Purchaser's rights under this
Agreement with respect to the matters disclosed therein.
6.12. WARN ACT. Purchaser shall be solely responsible for, and shall cause
the Company and the Mainland Subsidiaries to promptly perform and discharge, any
and all obligations arising from a Plant Closing or Mass Layoff occurring after
the Closing Date that results in Employment Loss at any of the employment sites
to be acquired from Seller, as those terms are defined by the WARN Act.
6.13. OBLIGATIONS WITH RESPECT TO CERTAIN CLAIMS. From and after the
Closing, Xxxxxxx and Seller shall be responsible for all liabilities arising out
of, or related to, events, acts or occurrences prior to the Closing that give
rise to a claim against a Company or any Mainland Subsidiary or the employees,
officers or directors thereof, including but not limited to third party claims
(including, but not limited to, the Xxxxxxx Litigation (as defined below)),
insured or uninsured claims, claims related to general liability, real estate,
professional liability or workers' compensation matters and related claims for
claim handling expenses, premium payments, retrospective premium adjustments,
deductibles, self-insured retentions and any collateral securing such
liabilities ("Pre-Closing Claims"), regardless of when the claim is brought or
reported. Purchaser shall cooperate with Xxxxxxx and Seller and shall provide
all assistance reasonably requested by Xxxxxxx and Seller in connection with
administering and resolving such Pre-Closing Claims from and after the Closing,
including, but not limited to, complying with Purchaser's obligations under
Article 10 hereof. For purposes of this Agreement, "Xxxxxxx Litigation" means
the lawsuit described under Item 2.N of Section 4.11 of the Disclosure Schedule.
6.14. HAWAII SUBSIDIARIES. The parties recognize that, prior to
Closing, Xxxxxxx and Seller intend to cause (i) the Company to sell, transfer
and convey all of the issued and outstanding shares of capital stock of each of
the Hawaii Subsidiaries to the Hawaii Purchaser pursuant to the terms of the
Hawaii Purchase agreement, and (ii) the Hawaii Joint Venture Ownership Interests
to be distributed or transferred to Xxxxxxx or any Affiliate of Xxxxxxx such
that neither the Company nor the Hawaii Subsidiaries will, directly or
indirectly, hold the Hawaii Joint Venture Ownership Interests of the closing of
the transactions contemplated by the Hawaii Purchase Agreement or the closing of
the transactions contemplated hereby. Purchaser will not obtain any interest in
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(i) the Hawaii Subsidiaries or the proceeds of the sale thereof, or (ii) the
Hawaii Joint Venture Ownership Interests.
6.15. INFORMATION RIGHTS. Between the date of this Agreement and the
Closing, Seller shall furnish promptly to Purchaser all separate monthly
financial statements and operational reports of the Company and the Mainland
Subsidiaries (as prepared in accordance with normal historical accounting
procedures) promptly after such financial statements are available, and all
other material information concerning the operations, properties and personnel
of the Company and the Mainland Subsidiaries as Purchaser may reasonably
request. Between the date of this Agreement and the Closing, Seller shall confer
and consult with representatives of Purchaser on a regular and frequent basis to
report on operational matters of the Business, provided such conferences and
consultations do not materially interfere with the operation of the Business.
6.16. NON-COMPETITION. In consideration of the benefits of this Agreement
to Xxxxxxx and Seller and in order to induce Purchaser to enter into this
Agreement, Xxxxxxx and Seller hereby covenant and agree that, from and after the
Closing and until the fifth anniversary of the Closing Date, Xxxxxxx, Seller and
any majority-owned Subsidiaries thereof shall not, directly or indirectly, as a
partner, stockholder, member, proprietor, consultant, joint venturer, investor
or in any other capacity, engage in, or own, manage, operate or control, or
participate in the ownership, management, operation or control of (i) any
business or entity which engages anywhere in the Continental United States and
Canada in the business of providing or provides vacation condominium and/or home
rental property management; and (ii) any business or entity which engages in the
business of providing or provides vacation condominium and/or home brokerage
services within a fifty (50) mile radius of any real estate brokerage office
actively operated by the Company or any of the Mainland Subsidiaries as of the
Closing Date; provided, however, that nothing herein shall (i) prohibit Xxxxxxx,
Seller and their majority-owned Subsidiaries from owning, in the aggregate, not
more than five percent (5%) of any class of securities of a publicly traded
entity in any of the foregoing lines of business so long as neither Xxxxxxx,
Seller nor any of their majority-owned subsidiaries participate in any way in
the management, operation or control of such entity, or (ii) prohibit Xxxxxxx,
Seller and their majority-owned Subsidiaries from owning or leasing the
condominium units located in the mainland United States currently owned by
Xxxxxxx (and not owned by the Company and the Mainland Subsidiaries) as of the
date hereof and as set forth in Section 6.16 of the Disclosure Schedule.
6.17. NON-SOLICITATION. In consideration of the benefits of this Agreement
to Xxxxxxx and Seller and in order to induce Purchaser to enter into this
Agreement, Xxxxxxx and Seller hereby covenant and agree that, from and after the
Closing and until the fifth anniversary of the Closing Date, Xxxxxxx, Seller and
their majority-owned Subsidiaries shall not, directly or indirectly, as a
partner, stockholder, member, proprietor, consultant, joint venturer, investor
or in any other capacity, solicit to hire or perform services (as an employee,
consultant or otherwise) any Persons who are or, within the six-month period
immediately preceding the Closing were, employees of the Company or the Mainland
Subsidiaries (excluding any employees whose employment is terminated by the
Company or the Mainland Subsidiaries on or after the Closing) or take any
actions which are intended to persuade any such employee of the Company or the
Mainland Subsidiaries to terminate his or her association with the Company or
the Mainland Subsidiaries; provided, however, that general solicitations of
employment published in a journal, newspaper or other publication of general
circulation or listed on any internet job site and not specifically directed
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towards such employees shall not be deemed to constitute solicitation for
purposes of this Section 6.17.
6.18. CONFIDENTIALITY. In consideration of the benefits of this Agreement
to Xxxxxxx and Seller and in order to induce Purchaser to enter into this
Agreement, Xxxxxxx and Seller hereby covenant and agree that, from and after the
Closing, Xxxxxxx and Seller and their Affiliates shall keep confidential and not
disclose to any other Person or use for their own benefit or the benefit of any
other Person any trade secrets, customer and supplier lists, pricing and cost
information, manufacturing and production processes technical data, designs,
drawings, specifications, and business and/or marketing plans and proposals
regarding the Company or the Mainland Subsidiaries. The obligation of Xxxxxxx,
Seller and their Affiliates under this Section 6.18 shall not apply to
information which: (a) is or becomes generally available to the public without
breach of the commitment provided for in this Section 6.18; (b) Xxxxxxx xxxxx
necessary or advisable to be included in filings with the Securities and
Exchange Commission or related public disclosures, or (c) is required to be
disclosed by law, order or regulation of a court or tribunal or government
authority; provided, however, that in any such case, Xxxxxxx and Seller shall
notify Purchaser as early as reasonably practicable prior to disclosure to allow
Purchaser to take appropriate measures to preserve the confidentiality of such
information. In addition, the parties acknowledge and agree that Xxxxxxx, Seller
and their representatives have provided confidential or proprietary information
to prospective purchasers of the Company and the Mainland Subsidiaries and their
business in connection with the strategic alternative review process with
respect thereto, and the provisions of this Section 6.18 will not apply to any
such information provided by Xxxxxxx, Seller or their representatives prior to
the date hereof.
6.19. ACKNOWLEDGMENT. Xxxxxxx and Seller acknowledge that the restrictions
contained in Sections 6.16, 6.17 and 6.18 of this Agreement are reasonable and
necessary to protect the legitimate interests of Purchaser and the value of the
goodwill associated with the Purchaser and continued operation of the Business
and do not cause Xxxxxxx, Seller or any of their respective Subsidiaries undue
hardship, and that any violations of Sections 6.16, 6.17 and 6.18 of this
Agreement will result in irreparable injury to Purchaser such that Purchaser
shall be entitled to preliminary and permanent injunctive relief in any court of
competent jurisdiction, which rights shall be cumulative and in addition to any
other rights or remedies to which Purchaser may be entitled. Purchaser, Xxxxxxx
and Seller agree that if any provision of Sections 6.16, 6.17 and 6.18 of this
Agreement is determined by a court of competent jurisdiction to be void or
unenforceable, the court making such determination is hereby authorized and
requested by Purchaser, Xxxxxxx and Seller to adjudge the provision in question
to be valid and enforceable to the maximum extent permissible under applicable
law, and to the extent such court is unable or unwilling to make such
adjudication, then Purchaser, Xxxxxxx and Seller shall use their best efforts to
renegotiate such provision to achieve an agreement as close as possible to the
original without infringing the relevant law and all other provisions of this
Agreement shall continue in full force and effect. The existence of any claim or
cause of action of Xxxxxxx or Seller against Purchaser, of whatever nature,
shall not constitute a defense to the enforcement by Purchaser of any provision
of Sections 6.16, 6.17 and 6.18 of this Agreement. If Xxxxxxx or Seller violate
any provision of Sections 6.16, 6.17 and 6.18 of this Agreement, the term of
such provisions shall be extended for the period of time during which Xxxxxxx or
Seller are in violation of any of such provisions.
37
6.20. ASSISTANCE WITH SEC FILINGS. In order to assist with potential
future SEC filing requirements of Purchaser's ultimate parent, Xxxxxxx shall (a)
provide such cooperation as Purchaser may reasonably request in connection with
such filing requirements; (b) make available the officers of Xxxxxxx and
cooperate with Purchaser in Purchaser's efforts to cause the independent
accountants of the Company to (i) re-issue their audit opinion on the Company's
historical 2006, 2005 and 2004 audited financial statements, (ii) deliver
consents to the inclusion or incorporation by reference of such report in the
SEC filings of the Purchaser's ultimate parent and (iii) deliver
"comfort-letters" in customary form in connection with any such SEC filing of
the Purchaser's ultimate parent for 2007 and 2006 unaudited quarterly periods
ending prior to the Closing Date. Purchaser shall reimburse Xxxxxxx and Seller
for all out-of-pocket expenses (including reasonable attorneys', accountants'
and other advisors' fees and expenses) incurred by Xxxxxxx and Seller in
connection with performing their obligations under this Section 6.20.
Notwithstanding the requirements of this Section 6.20, Purchaser acknowledges
that Seller does not control the independent accountants of the Company and can
not force such accountants to issue the reports or consents required above.
6.21. CLOSING OF THE TRANSACTION. Seller and Xxxxxxx shall use all
commercially reasonable efforts to consummate the Hawaii Disposition on or about
May 31, 2007. Notwithstanding anything to the contrary contained herein, if the
Hawaii Disposition is not consummated on or before June 30, 2007, Seller shall
be obligated to transfer the Hawaii Subsidiaries to an Affiliate of Seller, on
or before June 30, 2007, and to consummate the transactions described herein as
of such date, unless any of the conditions to the closing obligations of Seller
set forth in Section 7.1 or Section 7.3 of this Agreement (other than the
condition set forth in Section 7.3(f)) have not been satisfied as of such date
(such conditions, the "Applicable Closing Conditions"). In the event that the
Hawaii Disposition is not consummated on or before June 30, 2007 and each of the
Applicable Closing Conditions have been satisfied, and consistent with Section
11.11 herein, Purchaser shall have the right, in its sole discretion, to
institute an action for specific performance of the Agreement, and seek an order
immediately compelling Seller to transfer the Hawaii Subsidiaries as outlined
herein. Such action shall be filed in the state or federal courts in New York,
at the Purchaser's sole discretion, and Seller irrevocably and unconditionally
waives any right it may have to object to the jurisdiction or venue chosen and
agrees to submit to the jurisdiction and venue of the chosen court. In the event
that an action consistent with this Section 6.21 is filed and Purchaser is
ultimately successful, Seller shall reimburse Purchaser for all attorneys' fees,
costs, and expenses related to the commencement and prosecution of the action.
6.22. COOPERATION REGARDING UNCLAIMED PROPERTY CLAIMS. Following the
Closing, Purchaser shall cause the Company and the Mainland Subsidiaries to
cooperate with Xxxxxxx and Seller and shall provide all assistance reasonably
requested by Xxxxxxx and Seller in connection with the review, administration
and/or resolution of any unclaimed property claims involving Xxxxxxx and Seller
and their Subsidiaries under escheatment laws relating to the operations of the
Company and the Mainland Subsidiaries prior to the Closing.
6.23. STUB PERIOD AUDITED FINANCIAL STATEMENTS. After the Closing Date,
Xxxxxxx shall cause to be prepared, within the time periods set forth in Section
2.3(c) hereof, an audited balance sheet of the Company and the Mainland
Subsidiaries as of May 31, 2007, and the related audited statements of income,
changes in shareholders' equity and cash flows for the five-month period then
ended, including the notes thereto, audited by the independent accountants of
38
the Company (the "Stub Period Audited Financial Statements") (provided, that the
Stub Period Audited Financial Statements will not include any comparative
balances or amounts from prior fiscal years). Purchaser shall provide Xxxxxxx
with all relevant documents and information requested by Xxxxxxx, and shall
otherwise cooperate with Xxxxxxx, in connection with the Stub Period Audited
Financial Statements. Purchaser will be responsible for all fees and expenses
related to the Stub Period Audited Financial Statements, and will reimburse
Xxxxxxx for all such fees and expenses incurred by Xxxxxxx in connection
therewith. If the Closing Date is not June 1, 2007, then the applicable dates of
the Stub Period Audited Financial Statements shall be adjusted to include all
days in 2007 prior to the Effective Time.
ARTICLE 7
CLOSING CONDITIONS
7.1. CONDITIONS TO OBLIGATIONS OF SELLER AND PURCHASER TO CONSUMMATE THE
TRANSACTION. The respective obligation of each of Seller and Purchaser to
consummate the transactions contemplated hereby shall be subject to the
satisfaction of the following condition:
(a) Legality. No order, decree or injunction shall have been
entered or issued by any Governmental Authority which is in effect and has
the effect of making the transactions contemplated hereby illegal or
otherwise prohibiting consummation of the transactions contemplated
hereby. Each of Seller and Purchaser agrees that, in the event that any
such order, decree or injunction shall be entered or issued, it shall use
commercially reasonable efforts to cause any such order, decree or
injunction to be lifted or vacated.
7.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF PURCHASER. The obligations
of Purchaser to consummate the transactions contemplated hereby shall also be
subject to the satisfaction or waiver of each of the following conditions:
(a) Representations and Warranties. (i) The representations and
warranties of Seller contained in this Agreement that are qualified by
materiality or by Seller Material Adverse Effect shall be true and correct
on and as of the Closing Date (except to the extent such representations
and warranties shall have been expressly made as of an earlier date, in
which case such representations and warranties shall have been true and
correct as of such earlier date) with the same force and effect as if made
on and as of the Closing Date and (ii) the representations and warranties
of Seller contained in this Agreement that are not qualified as to
materiality or by Seller Material Adverse Effect shall be true and correct
in all material respects on and as of the Closing Date (except to the
extent such representations and warranties shall have been expressly made
as of an earlier date, in which case such representations and warranties
shall have been true and correct in all material respects as of such
earlier date) with the same force and effect as if made on and as of the
Closing Date.
(b) Agreements and Covenants. Seller shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
before the Closing.
(c) Certificate. Purchaser shall have received a certificate of an
executive officer of Seller that the conditions set forth in paragraphs
(a) and (b) above have been satisfied.
39
(d) Closing Deliveries. Purchaser shall have received the
documents and resolutions set forth in Section 3.2(b).
(e) No Material Adverse Effect. During the period from the date of
this Agreement to the Closing Date, there shall not have occurred, and
there shall not exist on the Closing Date, any Seller Material Adverse
Effect.
(f) Sale of Hawaii Subsidiaries. The Company shall have
consummated the sale of the Hawaii Subsidiaries pursuant to the terms of
the Hawaii Purchase Agreement or, at Seller's election, shall have
transferred the Hawaii Subsidiaries to an affiliate of Seller, on or prior
to the Closing Date and prior to the Closing (the "Hawaii Disposition").
(g) Opinion. Seller shall have delivered to Purchaser the written
opinion of Bass, Xxxxx & Xxxx, counsel to Seller, dated as of the Closing
Date, in substantially the form of Exhibit D attached hereto.
7.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of
Seller to consummate the transactions contemplated hereby shall also be subject
to the satisfaction or waiver of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Purchaser contained in this Agreement that are qualified by
materiality or by Purchaser Material Adverse Effect shall be true and
correct on and as of the Closing Date (except to the extent such
representations and warranties shall have been expressly made as of an
earlier date, in which case such representations and warranties shall have
been true and correct as of such earlier date) with the same force and
effect as if made on and as of the Closing Date, and (ii) the
representations and warranties of Purchaser contained in this Agreement
that are not qualified as to materiality or Purchaser Material Adverse
Effect shall be true and correct in all material respects on and as of the
Closing Date (except to the extent such representations and warranties
shall have been expressly made as of an earlier date, in which case such
representations and warranties shall have been true and correct in all
material respects as of such earlier date) with the same force and effect
as if made on and as of the Closing Date.
(b) Agreements and Covenants. Purchaser shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
before the Closing.
(c) Certificate. Seller shall have received a certificate of an
executive officer of Purchaser that the conditions set forth in paragraphs
(a) and (b) above have been satisfied.
(d) Closing Deliveries. Seller shall have received the documents
and resolutions set forth in Section 3.2(a) and Purchaser shall have made
the Closing Payment required pursuant to Section 2.2.
(e) Opinion. Seller shall have delivered to Purchaser the written
opinion of DLA Piper US LLP, counsel to Purchaser, dated as of the Closing
Date, in substantially the form of Exhibit E attached hereto.
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(f) Sale of Hawaii Subsidiaries. Subject to the terms of Section
6.21, the Company shall have consummated the sale of the Hawaii
Subsidiaries pursuant to the terms of the Hawaii Purchase Agreement;
provided, however, the parties hereto acknowledge and agree that the
condition described in this Section 7.3(f) is deemed waived if such Hawaii
sale of the Hawaii Subsidiaries is not consummated by June 30, 2007.
ARTICLE 8
CERTAIN TAX MATTERS
8.1. RESPONSIBILITY FOR FILING TAX RETURNS.
(a) Combined Tax Returns; Other Income Tax Returns. Seller shall
include the income of the Company and each of its subsidiaries on any
U.S., federal or foreign consolidated, unitary or combined Tax Returns of
Seller on which, and to the extent that, such income is properly
includable for all periods ending on or before the Closing Date (a "Seller
Consolidated Return") and pay any income Taxes attributable to such
income. Seller shall prepare or cause to be prepared, and file or cause to
be filed, all income Tax Returns for the Company and the Mainland
Subsidiaries for taxable periods ending on or before the Closing Date and
pay all Taxes shown thereon as due. All such income Tax Returns shall be
prepared in a manner substantially consistent with prior practice. The
Company and the Mainland Subsidiaries shall furnish Tax information to
Seller for inclusion in any Seller Consolidated Return for a period that
includes the Closing Date in accordance with the Company's and the
Mainland Subsidiaries' past custom and practice.
(b) Other Tax Returns. Purchaser shall prepare or cause to be
prepared and file or cause to be filed all Tax Returns for the Company and
the Mainland Subsidiaries that are required to be filed after the Closing
Date (other than Tax Returns described in Section 8.1(a)) and, except as
otherwise provided in Sections 8.2 and 8.3, and subject in all respects to
the provisions of Section 10.2 hereof, pay all Taxes shown thereon as due.
Purchaser shall permit Seller to review and comment on any such Tax Return
that covers a Pre-Closing Tax Period (as hereinafter defined) and/or a
Straddle Period (as hereinafter defined) prior to filing and shall make
such revisions to such Tax Returns as are reasonably requested by Seller.
8.2. LIABILITY FOR INCOME TAXES. Subject to Article 10 hereof, within
fifteen (15) days after having received written demand from Purchaser, Seller
shall reimburse Purchaser for all income Taxes of the Company and the Mainland
Subsidiaries that the Company or the Mainland Subsidiaries have paid anytime
after the Closing Date for any income Tax period ending on or before the Closing
Date (a "Pre-Closing Tax Period") and for Seller's portion (as determined
pursuant to Section 8.3) of all income Taxes of the Company and the Mainland
Subsidiaries for any income Tax period that begins before the Closing Date and
ends after the Closing Date (a "Straddle Period"). Purchaser shall be
responsible for all income Taxes of the Company and the Mainland Subsidiaries
for any income Tax period that begins after the Closing Date (a "Post-Closing
Tax Period") and for its portion (as determined pursuant to Section 8.3) of all
income Taxes of the Company and the Subsidiaries for any Straddle Period,
subject in all respects to the provisions of Section 10.2 hereof. Any amounts
paid by Sellers to Purchaser pursuant to this Section 8.2 shall be treated as an
adjustment to the Purchase Price unless otherwise required by Law.
41
8.3. APPORTIONMENT OF STRADDLE PERIOD INCOME TAXES. With respect to any
Straddle Period, the income Taxes attributable to such Straddle Period shall be
apportioned between the portion of the Straddle Period that begins on the first
day of the Straddle Period and ends on the Closing Date (the "Pre-Closing
Straddle Period"), which portion shall be the responsibility of Seller, and the
portion of the Straddle Period that begins on the day after the Closing Date and
ends on the last day of the Straddle Period ("Post-Closing Straddle Period"),
which portion shall be the responsibility of Purchaser. The portion of the
income Tax allocated to the Pre-Closing Straddle Period shall equal the amount
which would be payable if the Straddle Period ended on the last day of the
Pre-Closing Straddle Period, provided that all permitted allowances, exemptions
and deductions that are normally computed on the basis of an entire year or
period (such as depreciation) shall accrue on a daily basis. The portion of the
income Tax allocated to the Post-Closing Straddle Period shall equal the balance
of the income Tax attributable to the Straddle Period.
8.4. COOPERATION ON TAX MATTERS.
(a) Purchaser and Seller shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the
filing of Tax Returns pursuant to this Article 8 and any audit, litigation
or other proceeding with respect to Taxes. Such cooperation shall include
the retention and (upon the other party's request) the provision of
records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Seller and Purchaser agree
(i) to retain all books and records with respect to Tax matters pertinent
to the Company or a Mainland Subsidiary relating to any taxable period
beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by Purchaser or Seller, any
extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any Taxing Authority, and
(ii) to give the other party reasonable written notice prior to
transferring, destroying or discarding any such books and records and, if
Purchaser so requests, Seller shall allow Purchaser to take possession of
such books and records.
(b) Purchaser and Seller further agree, upon request, to use their
best efforts to obtain any certificate or other document from any
Governmental Authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including,
but not limited to, with respect to the transactions contemplated hereby).
8.5. REFUNDS AND TAX BENEFITS. Any income Tax refunds that are received
by Purchaser, the Company or any Mainland Subsidiary, and any amounts credited
against income Tax to which Purchaser, the Company or any Mainland Subsidiary
become entitled, that relate to income Tax periods or portions thereof ending on
or before the Closing Date shall be for the account of Seller and Purchaser
shall pay over to Seller any such refund or the amount of any such credit within
15 days after receipt or entitlement thereto. In addition, to the extent that a
claim for refund or a proceeding results in a payment or credit against income
Tax by a taxing authority to Purchaser, the Company or any Mainland Subsidiary
of any amount accrued on the Closing Balance Sheet, Purchaser shall pay such
amount to Seller within 15 days after receipt or entitlement thereto.
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8.6. NO CODE SECTION 338 ELECTION. Neither Purchaser, the Company nor any
of their Affiliates shall make any election under Section 338 of the Code with
respect to the transactions contemplated by this Agreement, unless specifically
agreed by Purchaser and Seller with respect to specific entities or assets.
8.7. CERTAIN TAXES. All transfer, documentary, sales, use, stamp,
registration and other similar Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be borne fifty
percent (50%) by Seller and fifty percent (50%) by Purchaser.
8.8. HAWAII DISPOSITION. Seller and Xxxxxxx hereby jointly and severally
represent, warrant and covenant that they have, as of the date hereof, and they
shall have, immediately after the Closing and at all relevant times thereafter,
sufficient liquid assets to satisfy and discharge in full when due any and all
Tax liability resulting from the Hawaii Disposition, and that Seller and/or
Xxxxxxx, as applicable, shall promptly pay and discharge in full all such Taxes
when due.
ARTICLE 9
TERMINATION
9.1. TERMINATION. This Agreement may be terminated at any time before the
Effective Time as follows:
(a) by mutual written consent of each of Seller and Purchaser;
(b) subject to the terms and conditions of Section 6.21, by either
Seller or Purchaser, if the Effective Time shall not have occurred on or
before June 30, 2007 (the "Termination Date"); provided, however, that the
right to terminate this Agreement under this Section 9.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before the Termination Date.
(c) by either Seller or Purchaser, if a Governmental Authority
shall have issued an order, decree or injunction having the effect of
making the transactions contemplated hereby illegal or permanently
prohibiting the consummation of the transactions contemplated hereby, and
such order, decree or injunction shall have become final and
non-appealable (but only if such party shall have used commercially
reasonable efforts to cause such order, decree or injunction to be lifted
or vacated and shall have otherwise complied with its obligations under
this Agreement, including Purchaser's obligations under Section 7.1(a));
(d) by either Seller or Purchaser, if there shall have been a
material breach by the other of any of its representations, warranties,
covenants or agreements contained in this Agreement, which breach would
result in the failure to satisfy one or more of the conditions set forth
in Section 7.2 (in the case of a breach by Seller) or Section 7.3 (in the
case of a breach by Purchaser).
9.2. EFFECT OF TERMINATION AND ABANDONMENT. In the event of termination
of this Agreement pursuant to this Article 9, this Agreement (other than as set
forth in Sections 6.4(b) and 6.6) shall become void and of no effect with no
liability on the part of any party hereto (or of any of its representatives);
provided, however, no such termination shall relieve any party hereto from any
liability for damages (or fees and out-of-pocket expenses) resulting from any
willful and intentional breach of this Agreement.
43
ARTICLE 10
INDEMNIFICATION
10.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND OTHER OBLIGATIONS.
The representations and warranties of Xxxxxxx and Seller in Sections 4.1
(Corporate Status), 4.2 (Authority) and 4.5 (Capitalization) (the "Fundamental
Representations") shall survive the Closing and continue in full force and
effect forever. The representations and warranties of Xxxxxxx and Seller in
Sections 4.12 (Environmental and Health and Safety Matters) and 4.15 (Taxes)
(the "Extended Representations") shall survive the Closing and continue in full
force and effect until the date 30 days after the expiration of the applicable
statute of limitations. The representations and warranties of Xxxxxxx and Seller
in Section 4.14 (Employee Matters and Benefit Plans) shall survive the Closing
and continue in full force and effect until the earlier of (i) the date 30 days
after the expiration of the applicable statute of limitations, or (ii) the date
six (6) years after the Closing Date. The representations and warranties of
Xxxxxxx and Seller in Section 4.13 (Compliance with Law) shall survive the
Closing and continue in full force and effect until the third anniversary of the
Closing Date. Each covenant and other agreement in this Agreement shall survive
the Closing and continue in full force and effect until the date 30 days after
the expiration of the applicable statute of limitations. The right of the
Purchaser Indemnified Parties to indemnification pursuant to clause (f) of
Section 10.2 shall survive the Closing and continue in full force and effect
until the fifth anniversary of the Closing Date. All other representations and
warranties in this Agreement shall survive the Closing and continue in full
force until the date eighteen months after the Closing Date. The right of the
Purchaser Indemnified Parties to indemnification pursuant to clauses (a), (b),
(c), and (d) of Section 10.2 below shall each survive the Closing and continue
in full force until the date 30 days after the expiration of any applicable
statute of limitations. The right of the Seller Indemnified Parties to
indemnification pursuant to the last sentence of Section 10.3 below shall
survive the Closing and continue in full force until the date 30 days after the
expiration of any applicable statute of limitations.
10.2. INDEMNIFICATION PROVISIONS FOR BENEFIT OF PURCHASER. In the event
Xxxxxxx or Seller breaches any representations, warranties, covenants or
agreements of Xxxxxxx or Seller contained herein, and, provided Purchaser issues
a Claim Notice (as hereinafter defined) within any such survival period, then,
subject to the terms hereof, Xxxxxxx and Seller jointly and severally agree to
indemnify and hold harmless Purchaser and its Affiliates and each of their
respective officers, directors, members, partners, managers and employees
(collectively, "Purchaser Indemnified Parties") from and against any losses,
fines, penalties, damages, Third Party Claims, costs, fees and expenses,
including attorneys', accountants', investigators', and experts' fees and
expenses incurred in investigating or defending any of the foregoing
(collectively, "Losses") through and after the date of the claim for
indemnification that are imposed on or incurred by Purchaser Indemnified Parties
that result from, arise out of, relate to, or are caused by the breach, subject
to the terms of this Article 10. In addition, Xxxxxxx and Seller jointly and
severally agree to indemnify and hold harmless Purchaser Indemnified Parties
from and against all Losses that are imposed on or incurred by Purchaser
Indemnified Parties that result from, arise out of, relate to, or are caused by
any of the following (for the avoidance of doubt, the following shall not be
subject to the Cap or Deductible set forth in Section 10.5 of this Agreement):
44
(a) Taxes which are imposed on the Company or any of its
Subsidiaries with respect to (i) any Pre-Closing Tax Period (it being
agreed and understood that, without any intent to exclude other items that
are Pre-Closing Period Taxes, any Tax imposed upon the Company or any of
the Subsidiaries with respect to Hawaii Disposition shall be treated as a
Pre-Closing Period Tax), (ii) the pre-Closing portion of any Straddle
Period as determined under Section 8.3 (collectively, "Pre-Closing Period
Taxes"), or any liability for the Taxes of any other Person under Treasury
Regulation Section 1.1502-6 (or similar provision of state, local or
foreign law) or as a transferor or successor, by contract or otherwise,
that would have been Pre-Closing Period Taxes within the meaning of the
foregoing definition if imposed upon the Company or any of its Mainland
Subsidiaries, but only to the extent the liability for such Taxes exceeds
the accrual for Taxes contained on the Closing Balance Sheet and taken
into account in the computation of the Working Capital, or (iii) any Taxes
and related Losses incurred with respect to either of the items disclosed
on Sections 4.15(a) or 4.15(c) of the Disclosure Schedule;
(b) (i) any liabilities or obligations of any nature whatsoever
with respect to the Hawaii Subsidiaries with respect to actions or events
occurring on or before the Closing Date or otherwise relating to the
ownership of the Hawaii Subsidiaries by the Company, including any sales
or transfers of the capital stock in, or assets of, any of the Hawaii
Subsidiaries, and (ii) any liabilities or obligations arising under the
Hawaii Purchase Agreement (excluding any liabilities or obligations that
result from, arise out of, relate to, or are caused by, any breach by the
Company or its Subsidiaries or Affiliates of Sections 6.13 or 6.14 of the
Hawaii Purchase Agreement). Provided that Purchaser issues a claim notice,
Xxxxxxx and Seller jointly and severally agree to indemnify and hold
harmless the Purchaser Indemnified Parties from and against all losses
that are imposed on or are incurred by Purchaser Indemnified Parties that
result from, arise out of, relate to, or are caused by the imposition of
any Guaranty Liabilities;
(c) any Pre-Closing Claims; and
(d) any amounts paid by the Company to ResortQuest Hawaii, LLC in
satisfaction of indemnification claims pursuant to clause (b) of Section
5.2 of the License Agreement.
10.3. INDEMNIFICATION PROVISIONS FOR BENEFIT OF SELLER. In the event
Purchaser breaches any representations, warranties, covenants or agreements of
Purchaser contained herein, and provided Seller issues a Claim Notice within any
survival period, then Purchaser agrees to indemnify Seller and its Affiliates
and each of their respective officers, directors, members, partners, managers
and employees (collectively, "Seller Indemnified Parties") from and against any
Losses through and after the date of the claim for indemnification that are
imposed on or incurred by Seller Indemnified Parties result from, arise out of,
relate to, or are caused by the breach (or the alleged breach), subject to the
terms of this Article 10. In addition, Purchaser shall indemnify the Seller
Indemnified Parties from and against any Losses that are imposed on or incurred
by the Seller Indemnified Parties to the extent arising from or out of the
operations of the Company and the Mainland Subsidiaries following the Closing
(subject to the representations, warranties, covenants and other agreements of
Xxxxxxx and Seller set forth herein) (for the avoidance of doubt, any claims
pursuant to this sentence shall not be subject to the Cap or Deductible set
forth in Section 10.6 of this Agreement).
45
10.4. PROCEDURE FOR MATTERS INVOLVING THIRD PARTIES.
(a) If any third party shall notify either party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give
rise to a claim for indemnification against the other party (the
"Indemnifying Party") under this Article 10, then the Indemnified Party
shall promptly issue a Claim Notice to the Indemnifying Party with respect
thereto.
(b) An Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as the
Indemnifying Party notifies the Indemnified Party in writing within 30
days following the receipt of the Claim Notice that (i) the Indemnifying
Party desires to assume the defense of the Third Party Claim and (ii) the
Indemnifying Party thereafter conducts the defense of the Third Party
Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 10.4(b), the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim. The Indemnifying
Party will not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party, which consent will not be unreasonably
withheld, except the Indemnifying Party may consent to the entry of
judgment or settlement without the consent of the Indemnified Party if (i)
the judgment or settlement is solely for money damages and (ii) contains
an unconditional release of the Indemnified Party of all liability
(including any restrictions on the Indemnified Party's business,
operations or assets).
(d) In the event any of the conditions in Section 10.4(b) is or
becomes unsatisfied, the Indemnified Party may defend against the Third
Party Claim and the Indemnifying Party will remain responsible for any
Losses the Indemnified Party may suffer resulting from the Third Party
Claim.
(e) A party suffering Losses that gives or could give rise to a
claim for indemnification under this Article 10 shall promptly notify the
other party thereof in writing (a "Claim Notice") in accordance with
Section 11.1. The Claim Notice shall contain a brief description of the
nature of the Losses suffered and, if practicable, an aggregate dollar
value estimate of the Losses suffered. No delay in the issuance of a Claim
Notice shall relieve either party from any obligation under this Article
10, unless and solely to the extent the Indemnifying Party is thereby
prejudiced.
10.5. LIMITATIONS ON SELLER'S INDEMNIFICATION LIABILITY.
(a) Ceiling. Seller's and Gaylord's aggregate liability for
indemnification claims with respect to breaches of representations and
warranties hereunder by Seller and/or Xxxxxxx shall not exceed Six Million
Dollars ($6,000,000) (the "Cap").
(b) Basket. Seller and Xxxxxxx shall have no liability for
indemnification claims with respect to breaches of representations and
warranties by Seller and/or Xxxxxxx unless and until the aggregate Losses
claimed under Section 10.2 with respect to such breaches exceed One
Hundred Fifty Thousand ($150,000) (the "Deductible") and then only for the
amount by which such Losses exceed the Deductible.
46
(c) Exceptions to Cap and Deductible. The limitations in
subsections (a) and (b) above of this Section 10.5 shall not apply to any
Losses described in Section 10.2(a) through (e), or any Losses arising out
of or in connection with any breaches of Section 4.2 (Authority), 4.5
(Capitalization) or 4.12 (Environmental and Safety and Health Matters) of
this Agreement.
10.6. LIMITATIONS ON PURCHASER'S INDEMNIFICATION LIABILITY.
(a) Ceiling. Purchaser's aggregate liability for indemnification
claims with respect to breaches of representations and warranties by
Purchaser shall not exceed the Cap.
(b) Basket. Purchaser shall have no liability for indemnification
claims with respect to breaches of representations and warranties by
Purchaser, unless and until the aggregate Losses claimed under Section
10.3 with respect to such breaches exceed the Deductible, and then only
for the amount by which such Losses exceed the Deductible.
(c) Exceptions to Cap and Deductible. The limitations in
subsections (a) and (b) above of this Section 10.6 shall not apply to any
Losses arising under the last sentence of Section 10.3 or in connection
with any breaches of Section 5.2 (Authority).
10.7. DETERMINATION OF LOSSES. The amount of Losses incurred by any
indemnified persons hereunder will be determined net of any amounts received by
such persons under applicable insurance policies with respect to such Losses.
10.8. EXCLUSIVE REMEDY. Subject to the right of Purchaser to specific
performance pursuant to the terms of Section 6.21 and in the event the Closing
occurs, Purchaser and Seller acknowledge and agree that the foregoing
indemnification provisions in this Article 10 shall be the exclusive remedy of
Purchaser (and the other Purchaser Indemnified Parties) and Seller (and the
other Seller Indemnified Parties) with respect to the transactions contemplated
by this Agreement (other than for fraud, willful misconduct or specific
performance of this Agreement, which shall be available as a remedy as set forth
in Section 11.11 hereof). Each party to this Agreement hereby waives all
statutory, common Law and other claims with respect to this Agreement, other
than claims for indemnification with respect to this Agreement pursuant to (and
in accordance with the terms of) this Article 10 and other than claims for
fraud, willful misconduct or specific performance or injunctive relief.
Notwithstanding anything herein to the contrary, in no event shall Seller or
Purchaser be liable for any special, punitive or consequential damages (unless
such damages (i) are claimed in a Third Party Claim, or (ii) arise out of a
breach by Seller of Section 4.5 (Capitalization) hereof), and Purchaser shall
not be entitled to recover or seek any remedy under this Agreement to the extent
that such amount is included in the calculation of the Adjustment Amount.
ARTICLE 11
MISCELLANEOUS
11.1. NOTICES. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date of receipt and shall be delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt requested), sent
by overnight courier or sent by telecopy, to the applicable party at the
following addresses or telecopy numbers (or at such other address or telecopy
number for a party as shall be specified by like notice):
47
(a) if to Seller: Xxxxxxx Hotels, Inc.
c/o Gaylord Entertainment Company
Xxx Xxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx X. Xxxx
Telecopy No.: (000) 000-0000
with a copy to: Bass, Xxxxx & Xxxx PLC
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: F. Xxxxxxxx Xxxxxx, Xx.
Telecopy No.: (000) 000-0000
(b) if to Purchaser: Leucadia National
Corporation 000 Xxxx Xxxxxx Xxxxx, 00xx
Xxxxx Xxx Xxxx, Xxx Xxxx 00000 Attention:
Xxxxxx Xxxxxx Telecopy No.: (000) 000-0000
with a copy to: DLA Piper US LLP
000 Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Telecopy No.: (000) 000-0000
11.2. CERTAIN DEFINITIONS; INTERPRETATION.
(a) For purposes of this Agreement, the following terms shall have
the following meanings:
(i) "Action" means any written claim, action, suit,
countersuit, arbitration or proceeding by or before any Governmental
Authority or any arbitral authority convened pursuant to any
contractual dispute resolution provision.
(ii) "Affiliate" of a Person means a Person that directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the first mentioned
Person.
(iii) "Affiliated Group" means any affiliated group within the
meaning of Section 1504(a) of the Code or any similar group defined
under a similar provision of state, provincial, local or foreign
law.
(iv) "Ancillary Agreements" mean, collectively, (A) the
Seller Note, (B) the Transition Services Agreement, and (C) the
Release.
(v) "Business" means the provision of vacation condominium
and home rental property management services and vacation rental
real estate brokerage services.
48
(vi) "CERCLA" means Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
(vii) "Code" means the Internal Revenue Code of 1986, as
amended.
(viii)"Control" (including the terms "controlled by" and
"under common control with") means the possession, direct or
indirect, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership
of stock, as trustee or executor, by contract or credit arrangement
or otherwise.
(ix) "Copyrights" means all of the Company's and the Mainland
Subsidiaries' copyrightable published and unpublished works,
including but not limited to world wide web sites, all copyrights
(whether or not registered, and including all moral rights thereto)
and all applications, registrations, renewals and extensions in
connection therewith, together with all translations, adaptations,
modifications, derivations, combinations and derivative works
thereof created by or at the direction of Company or any of the
Mainland Subsidiaries.
(x) "Data Room" means the electronic, virtual collection of
materials made available to Seller to Purchaser with respect to the
Company and the Mainland Subsidiaries.
(xi) "Earnout" means any additional future payment to be paid
by the Company or the Mainland Subsidiaries to another Person
pursuant to an agreement which was entered into prior to Closing in
connection with the purchase of property or a business by the
Company or the Mainland Subsidiaries from such Person, which payment
is in lieu of the full purchase price and is contingent solely on
the future earnings or financial performance of such acquired
property or business, excluding, for purposes of clarification, any
payments made by the Company or the Mainland Subsidiaries under any
front desk leases, consulting agreements or exclusive rental
management agreements.
(xii) "Environmental Laws" means all federal, state,
provincial or local statutes, laws, rules, ordinances, codes, rule
of common law, regulations, judgments and orders in effect on the
Closing Date and relating to protection of human health or the
environment (including ambient air, surface water, ground water,
drinking water, wildlife, plants, land surface or subsurface
strata), including laws and regulations relating to Releases or
threatened Releases of Hazardous Substances, or otherwise relating
to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Substances.
(xiii) "Governmental Authority" means any national, federal,
provincial, state or local governmental, regulatory or
administrative agency, commission, department, board, bureau,
tribunal or court, whether local, domestic, foreign or
multinational, exercising executive, legislative, judicial,
regulatory or administrative functions of a nation or any state,
provincial, municipal or other political subdivision thereof.
49
(xiv) "Governmental Order" means any order, writ, judgment,
injunction, decree, stipulation, determination, ruling, sanction or
award entered by or with any Governmental Authority.
(xv) "Guaranty Liabilities" means any liability of the
Company and any Mainland Subsidiary arising under or pursuant to
that certain Credit Agreement dated as of March 23, 2007, between
Xxxxxxx Entertainment Company, as borrower, the Company and certain
other parties as guarantors and Bank of America as the Letter of
Credit Issuer and Administrative Agent for the lenders under such
credit facility. Without limiting the foregoing, "Guaranty
Liabilities" shall include, without limitation, all such liabilities
imposed on such parties from and after the date of this Agreement.
(xvi) "Hawaii Subsidiaries" means RQI Holdings, Ltd., a Hawaii
corporation, and ResortQuest Real Estate of Hawaii, Inc., a Hawaii
corporation, and each of their Subsidiaries.
(xvii) "Hazardous Substances" means: (i) any petroleum or
petroleum products, radioactive materials, asbestos in any friable
form, urea formaldehyde foam insulation, transformers or other
equipment that contain dielectric fluid containing regulated levels
of polychlorinated biphenyls (PCBs) and radon gas; and (ii) any
chemicals, materials or substances which are now or ever have been
defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances," "toxic
pollutants," or other words of similar import, under any
Environmental Law.
(xviii) "Intellectual Property" means all Patents, Marks,
Copyrights, domain names, Software and trade secrets (and including
remedies against and rights to xxx for past infringements, and
rights to damages and profits due or accrued in or relating to any
of the foregoing), confidential business information (including
ideas, research and development, know-how, formulae, compositions,
manufacturing and production processes and techniques, methods,
technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information and business and
marketing plans and proposals), material advertising and promotional
materials and other proprietary rights in intangible forms of
property owned or exclusively licensed to the Company or any of the
Mainland Subsidiaries.
(xix) "Intellectual Property Rights" means collectively,
rights under Patent, Trademark, Copyright, and trade secret laws,
and any other intellectual property, industrial, or proprietary
rights worldwide, however designated, including moral rights and
similar rights.
(xx) "Law" means any Governmental Order or any law, statute,
ordinance, code, treaty, rule or regulation of any Governmental
Authority, or any binding agreement with any Government Authority.
(xxi) "License Agreement" means the Trademark and Domain Names
License Agreement to be entered into by Seller and ResortQuest
Hawaii, LLC upon the closing of the transactions contemplated by the
Hawaii Purchase Agreement.
50
(xxii) "Mainland Subsidiaries" means the direct and indirect
Subsidiaries of the Company other than the Hawaii Subsidiaries.
(xxiii)"Marks" means all of the Company's and the Mainland
Subsidiaries' trademarks, service marks, trade dress, logos,
slogans, Internet domain names, trade names, corporate names, other
commercial product or service designations and all other indicia of
origin, whether or not registered, together with all translations,
adaptations, modifications, derivations and combinations thereof and
including all goodwill associated therewith and all applications,
registrations, renewals and extensions in connection therewith.
(xxiv) "Material Software" means Software material to the
business or results of operations of the Company and the Mainland
Subsidiaries.
(xxv) "Patents" means all of the Company's and the Mainland
Subsidiaries' inventions, developments, discoveries, know-how,
concepts and ideas (whether or not reduced to practice), all
improvements thereto and all patents, patent applications and patent
disclosures, together with all re-issuances, continuations,
continuations-in-part, divisions, revisions, extensions,
reexaminations and counterparts thereof (whether or not any of the
foregoing are registered), and all industrial designs, industrial
models and utility models.
(xxvi) "Permit" means any licenses, permits, registrations and
government approvals issued or granted by any Governmental
Authority.
(xxvii) "Person" means an individual, corporation,
partnership, limited liability company, association, trust,
unincorporated organization, entity or group.
(xxviii) "Purchaser Material Adverse Effect" means any
material adverse change in or material adverse effect on the
business, results of operations or financial condition of Purchaser
or on the ability of Purchaser to perform its obligations under this
Agreement and any ancillary agreements or on the ability of
Purchaser to consummate the purchase of the Shares and the other
transactions contemplated hereby.
(xxix)"Purchaser's Knowledge", or words of similar import,
means the actual knowledge or constructive knowledge, as applicable,
after reasonable due inquiry, of any officer of the Purchaser.
(xxx) "Release" means any release, spill, emission, emptying,
leaking, injection, deposit, disposal, discharge, dispersal,
leaching, pumping, pouring, or migration into the atmosphere, soil,
surface water, groundwater or property.
(xxxi)"SEC" means the Securities and Exchange Commission.
(xxxii)"Seller Material Adverse Effect" means any material
adverse change in or material adverse effect on the business,
results of operations, condition (financial or otherwise), assets,
or liabilities of the Company and the Mainland Subsidiaries, taken
as a whole; provided, however, that changes or effects (1) resulting
from or relating to changes in economic conditions or financial or
51
securities markets in general or the industries and markets in which
the Company and the Mainland Subsidiaries operate, including changes
resulting from travel restrictions, economic downturn or other
factors generally affecting leisure travel or the leisure travel
business, weather or natural conditions, political conditions,
commodity prices or changes in laws, rules and regulations, (2)
resulting from the execution and performance of this Agreement or
any action taken at Purchaser's request and the announcement of this
Agreement and the transactions contemplated hereby, or (3) resulting
from the breach by Purchaser of this Agreement, shall be excluded
from the determination of Seller Material Adverse Effect.
(xxxiii) "Seller's Knowledge", or words of similar import,
means the actual knowledge or constructive knowledge, as applicable,
after reasonable due inquiry of the following key employees of
Seller or the Company, as applicable: (a) Xxxx Xxxxxxxxxx, (b) Xxxxx
Xxxxx, (c) Xxxx XxXxxxxx, (d) Xxxx Xxxxxxx, (e) Xxxxxxx Xxxxxxx, (f)
Xxxxx Xxxxxx, (g) Xxxx Xxxxxxxx, (h) Xxxxx Xxxxx, or (i) Xxxxx Xxxx.
(xxxiv) "Software" means all computer software and subsequent
versions thereof (including source code, object code, executable or
binary code, objects, comments, report formats, templates, menus,
and all files, data, materials, databases manuals, design notes and
documentation related thereto or associated therewith), together
with all translations, adaptations, modifications, derivations,
combination and derivative works thereof, which is owned, licensed,
leased or otherwise used by the Company or the Mainland
Subsidiaries.
(xxxv) "Subsidiary" of a Person means any corporation or other
legal entity of which such Person (either alone or through or
together with any other Subsidiary or Subsidiaries) is the general
partner or managing entity or of which at least a majority of the
stock or other equity interests the holders of which are generally
entitled to vote for the election of the board of directors or
others performing similar functions of such corporation or other
legal entity is directly or indirectly owned or controlled by such
Person (either alone or through or together with any other
Subsidiary or Subsidiaries); provided, however, that, for purposes
of clarification, RHAC Holdings, LLC and Waipouli Holdings, LLC will
not be considered Subsidiaries of (i) the Company, (ii) any Mainland
Subsidiary, (iii) any Hawaii Subsidiary, or (iv) GEC or any
Subsidiary of GEC for purposes of this Agreement.
(xxxvi) "Taxes" means any and all taxes, fees, levies or other
assessments, including, without limitation, federal, state,
provincial, local or foreign income, gross receipts, excise, real or
personal property, sales, withholding, social security, occupation,
use, service, service use, value added, license, net worth, payroll
franchise or similar taxes, imposed by any Taxing Authority,
together with any interest, penalties or additions to Tax and
additional amounts imposed with respect thereto, and the term "Tax"
means any one of the foregoing Taxes
(xxxvii) "Taxing Authority" means any Governmental Authority
responsible for the imposition or collection of any Taxes.
52
(xxxviii) "Tax Return" means any report, return, document,
declaration, statement or other information or filing required to be
supplied to any Taxing Authority or jurisdiction (foreign or
domestic) with respect to Taxes, and the term "Tax Return" means any
one of the foregoing Tax Returns.
(xxxix) "Unrestricted Cash" means the sum of the aggregate
balances of cash and cash equivalents reflected on the balance
sheets of the Company and the Mainland Subsidiaries which are not
subject to any deposit, trust, escrow, or any other limitation
imposed by a state, council, or as a result of any real estate
transaction for which the cash would be deemed restricted, net of
outstanding cut but uncashed checks.
(xl) "WARN Act" means the Workers' Adjustment and Retraining
Notification Act of 1988, 29 U.S.C. ss. 2101, et. seq., and any
similar state and local applicable Law, as amended from time to
time, and any regulations, rules and guidance issued pursuant
thereto.
(b) When a reference is made in this Agreement to Articles,
Sections, or Disclosure Schedule, such reference is to an Article or a
Section of, or Disclosure Schedule to, this Agreement, unless otherwise
indicated. 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. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be
understood to be followed by the words "without limitation."
11.3. SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon a determination that any term or other provision is
invalid, illegal or incapable of being enforced, Seller and Purchaser shall
negotiate in good faith to modify this Agreement so as to effect their original
intent as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the maximum extent possible.
11.4. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement,
including all exhibits, and schedules attached hereto, the Ancillary Agreements,
the Disclosure Schedule, and the Confidentiality Agreement constitute the entire
agreement and supersede any and all other prior agreements and undertakings,
both written and oral, among the parties hereto, or any of them, with respect to
the subject matter hereof and do not, and is not intended to, confer upon any
Person other than the parties hereto, any rights whatsoever.
11.5. AMENDMENT; WAIVER. This Agreement may be amended only in a writing
signed by each party hereto. Any waiver of rights hereunder must be set forth in
writing. A waiver of any breach or failure to enforce any of the terms or
conditions of this Agreement shall not in any way affect, limit or waive either
party's rights at any time to enforce strict compliance thereafter with every
term or condition of this Agreement.
11.6. BINDING EFFECT; ASSIGNMENT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective legal
representatives and successors (including all obligations set forth herein),
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whether by merger, acquisition, business combination or otherwise.
Notwithstanding the foregoing, this Agreement shall not be assigned by any party
hereto by operation of law or otherwise without the express written consent of
the other party.
11.7. DISCLOSURE SCHEDULE. The Disclosure Schedule and any Disclosure
Schedule Supplement shall be construed with and as an integral part of this
Agreement to the same extent as if the same had been set forth verbatim herein.
Any matter disclosed pursuant to the Disclosure Schedule or any Disclosure
Schedule Supplement shall not be deemed to be an admission or representation as
to the materiality of the item so disclosed. No disclosure in any particular
schedule in the Disclosure Schedule or any Disclosure Schedule Supplement shall
be adequate to disclose an exception to a representation or warranty disclosed
in any other sections of this Disclosure Schedule or any Disclosure Schedule
Supplement unless the applicability of such disclosure to the other schedules is
clear and obvious.
11.8. GOVERNING LAW; WAIVER OF JURY TRIAL. This Agreement shall be
governed by and construed in accordance with, the laws of the State of New York
without regard to the conflicts of laws provisions thereof. Each of the parties
hereto hereby irrevocably and unconditionally waives any right it may have to
trial by jury in connection with any litigation arising out of or relating to
this agreement, the transactions contemplated hereby or any of the other
transactions contemplated hereby.
11.9. CONSTRUCTION. The headings of Articles and Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. The language used in this Agreement is the language chosen by
the parties to express their mutual intent, and no rule of strict construction
shall be applied against any party.
11.10. COUNTERPARTS. This Agreement may be executed simultaneously in one
or more counterparts (including by facsimile or electronic .pdf submission), and
by the different parties in separate counterparts, each of which when executed
shall be deemed to be an original, but all of which shall constitute one and the
same agreement.
11.11. ENFORCEMENT. The parties hereto agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties hereto shall be entitled to an injunction
or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at Law or in equity.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
BEI-RZT CORPORATION
By:_______________________________________
Name:_____________________________________
Title:____________________________________
XXXXXXX HOTELS, INC.
By:_______________________________________
Name:_____________________________________
Title:____________________________________
XXXXXXX ENTERTAINMENT COMPANY
By:_______________________________________
Name:_____________________________________
Title:____________________________________
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