EXHIBIT 10.19
STOCK PURCHASE AGREEMENT
dated as of February 10, 1999
by and among
Meditrust Corporation,
a Delaware corporation,
and
Meditrust Operating Company,
a Delaware corporation
and
Golf Acquisitions, L.L.C.,
a Delaware limited liability company
TABLE OF CONTENTS
ARTICLE I PURCHASE OF SHARES;CLOSING
Section 1.1 Purchased Shares
Section 1.2 Deposit; Liquidated Damages
Section 1.3 Purchase Price
Section 1.4 Closing
Section 1.5 Transactions at Closing
Section 1.6 Allocation of Purchase Price
Section 1.7 Time of the Essence
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Section 2.1 Organization of the Sellers and the Acquired Companies; Authority
Section 2.2 Capitalization; Subsidiaries
Section 2.3 No Conflict
Section 2.4 Financial Statements; Undisclosed Liabilities; Financial Condition
Section 2.5 Absence of Certain Changes
Section 2.6 Consents and Approvals
Section 2.7 Litigation
Section 2.8 Taxes
Section 2.9 Employee Benefit Plans
Section 2.10 Assets; Properties
Section 2.11 Labor and Employment Matters
Section 2.12 Contracts and Commitments
Section 2.13 Intellectual Property
Section 2.14 Environmental Matters
Section 2.15 Compliance with Laws; Permits
Section 2.16 Insurance
Section 2.17 Brokers
Section 2.18 Disclaimer; Knowledge; Disclosure; Material Adverse Effect
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER
Section 3.1 Organization of the Buyer; Authority
Section 3.2 No Conflict
Section 3.3 Consents and Approvals
Section 3.4 Litigation
Section 3.5 Financing
Section 3.6 Brokers
Section 3.7 Investment Intent
Section 3.8 Buyer's Knowledge
ARTICLE IV CERTAIN COVENANTS AND AGREEMENTS OF THE BUYER
AND SELLER
Section 4.1 Conduct of Business Prior to Closing
Section 4.2 Investigation
Section 4.3 Access to Information
Section 4.4 Confidentiality
Section 4.5 Regulatory and Other Authorizations; Consents
Section 4.6 Further Action
Section 4.7 Press Releases
Section 4.8 No Solicitation
Section 4.9 Tax Cooperation; Structuring Matters
Section 4.10 Repair of Damage; Condemnation
Section 4.11 Liquor Licenses
Section 4.12 Environmental Assessments
Section 4.13 Property Holdback Rights
Section 4.14 Observation Rights; Certain Communications
ARTICLE V EMPLOYEE MATTERS
Section 5.1 Employees
Section 5.2 Employee Benefits
Section 5.3 Other Employee Benefits
Section 5.4 Indemnity
Section 5.5 No Third Party Beneficiaries
ARTICLE VI TAX MATTERS
Section 6.1 Conveyance Taxes; Costs
Section 6.2 Treatment of Indemnity Payments
Section 6.3 Employee Withholding
ARTICLE VII CONDITIONS TO CLOSING
Section 7.1 Conditions to the Obligations of Each Party
Section 7.2 Conditions to Obligations of the Sellers
Section 7.3 Conditions to Obligations of the Buyer
ARTICLE VIII INDEMNIFICATION
Section 8.1 Survival
Section 8.2 Indemnification by the Sellers
Section 8.3 Indemnification by the Buyer
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination
Section 9.2 Effect of Termination
Section 9.3 Waiver
ARTICLE X GENERAL PROVISIONS
Section 10.1 Notices
Section 10.2 Certain Definitions
Section 10.3 Interpretation
Section 10.4 Counterparts
Section 10.5 Entire Agreement; No Third Party Beneficiaries; Severability
Section 10.6 Amendment
Section 10.7 Governing Law
Section 10.8 Assignment
Section 10.9 Expenses
EXHIBITS LIST
Exhibit A Companies and Acquired Shares
Exhibit B Subsidiaries Owned by the Companies
Exhibit C Form of Escrow Agreement
Exhibit D Form of Transferor's Certificate of Non-Foreign Status
SCHEDULES LIST
Schedule 1.6(a) Purchase Price Allocation
Schedule 1.6(b) Fair Market Value of MGG and MGG II Assets
Schedule 2.2(a) Company Capitalization
Schedule 2.2(b) Company Subsidiaries
Schedule 2.3 Conflicts of Sellers
Schedule 2.4 October Financial Statements
Schedule 2.5 Absence of Certain Changes
Schedule 2.6(a) Governmental Consents
Schedule 2.6(b) Third-Party Consents
Schedule 2.7 Litigation
Schedule 2.8 Taxes
Schedule 2.9 Employee Benefit Matters
Schedule 2.10(a) Owned Properties
Schedule 2.10(b) Leased Properties
Schedule 2.10(c) Property Restrictions
Schedule 2.10(d) Property Taxes
Schedule 2.11(a) Employment Matters
Schedule 2.11(b) Labor Matters
Schedule 2.12(a) Certain Contracts
Schedule 2.12(b) Certain Contract Exceptions
Schedule 2.13 Intellectual Property
Schedule 2.14 Environmental Matter
Schedule 2.15 Compliance with Laws; Permits
Schedule 2.16 Insurance
Schedule 2.18(b) Qualifying Materials
Schedule 3.2 Conflicts of Buyer
Schedule 3.3(a) Government Consents
Schedule 3.3(b) Third- Party Consents
Schedule 4.1(a)(I) Conduct of Business
Schedule 4.1(c) Exceptions to Restrictions on Conduct of Business
Schedule 4.7 Form of Press Release
Schedule 4.12 Environmental Assessments
Schedule 4.13 Property Holdback Rights
Schedule 6.4 Allocation for Cobblestone Assets
Schedule 7.3(b) Required Consents
DEFINED TERMS
Agreement
REITCO
OPCO
Sellers
Buyers
MGG
Cobblestone
MGG II
Companies
Subsidiaries
Acquired Companies
Acquired Shares
Transfer
Escrow Agent
Deposit
Escrow Fund
Escrow Agreement
Liquidated Damages
Code
Qualifying Income
IRS
Purchase Price
Closing Balance Sheet
GAAP
Closing Adjustment
Review Period
Disputed Items
Arbitrating Accountant
Closing
Closing Date
Allocation Schedule
October Balance Sheet
October Financial Statements
Severance Arrangements
Retention Bonuses
Governmental Authority
HSR Act
IRS
Taxes
Tax Return
Benefit Plans
ERISA
ERISA Affiliate
Owned Properties
Land
Improvements
Leasehold
Lease
Leased Properties
Leased Improvements
Properties
Property Restrictions
Existing Debt
Intellectual Property Rights
Environmental Reports
Environmental Laws
Environmental Condition
Environmental Liabilities and Costs
Law
Governmental Order
Confidential Memorandum
Review Room
Qualifying Materials
Sellers' Knowledge
Material Adverse Effect
Buyer's Knowledge
Club
Representatives
Confidentiality Agreement
Notification Form
Acquisition Proposal
Proposal
Superior Proposal
Phase II Investigations
Holdback Designation Date
Holdback Property
Holdback Letter
Allocated Value
Holdback Property Closing Date
Sellers' Designees
Acquired Companies Employees
WARN
Required Consents
Buyer Indemnified Party
Organizational Reps
Tax Reps
Benefit Plan Reps
Broker's Fee Reps
Indemnified Disputes
Excluded Claims
Indemnification Cut-Off Date
Threshold Amount
Maximum Amount
Seller Indemnified Party
Significant Environmental Liabilities
Baseline Condition
Affiliate
Business Day
Encumbrance
Losses
Person
Subsidiary
Significant Subsidiary
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of this 10th
day of February, 1999, by and among MEDITRUST CORPORATION, a Delaware
corporation ("REITCO"), MEDITRUST OPERATING COMPANY, a Delaware corporation
("OPCO" and, together with REITCO, the "Sellers" and, each individually, a
"Seller") and GOLF ACQUISITIONS, L.L.C., a Delaware limited liability company
(the "Buyer").
WHEREAS, as set forth on Exhibit A hereto, REITCO owns all of the issued and
outstanding capital stock of Meditrust Golf Group, Inc., a Delaware corporation
("MGG");
WHEREAS, as set forth on Exhibit A hereto, OPCO owns all of the issued and
outstanding capital stock of The Cobblestone Golf Companies, Inc., a Delaware
corporation ("Cobblestone");
WHEREAS, as set forth on Exhibit A hereto, REITCO owns, or will own as of the
Closing Date (as hereinafter defined), all of the issued and outstanding capital
stock of Meditrust Golf Group II, Inc., a Delaware corporation ("MGG II" and,
together with MGG and Cobblestone, the "Companies"; and each individually, a
"Company");
WHEREAS, the Companies directly or indirectly own all (except as disclosed on
Schedule 2.2(b) hereto) of the issued and outstanding capital stock of those
entities set forth on Exhibit B hereto (collectively, the "Subsidiaries" and,
each individually, a "Subsidiary" and, together with the Companies, the
"Acquired Companies" and, each individually, an "Acquired Company");
WHEREAS, the Acquired Companies are engaged in the ownership, leasing, and
operation of golf course properties; and
WHEREAS, the Sellers desire to sell and the Buyer desires to purchase all of the
issued and outstanding capital stock (the "Acquired Shares") of the Companies.
NOW THEREFORE, in consideration of the mutual agreements and covenants herein
contained, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties, intending to be legally
bound, hereby agree as follows:
ARTICLE I
PURCHASE OF SHARES; CLOSING
Section 1.1 Purchased Shares. Subject to the terms and conditions set forth
in this Agreement, at the Closing (as hereinafter defined), each Seller shall
sell, assign, transfer, convey and deliver (the "Transfer") to the Buyer, from
each such Seller, and the Buyer shall buy and receive from each such Seller all,
and not less than all, of such Seller's right, title and interest as of the
Closing Date, in and to the Acquired Shares as set forth on Exhibit A hereto.
Section 1.2 Deposit; Liquidated Damages.
(a) No later than the first Business Day (as hereinafter defined) after
the date this Agreement is executed and delivered by all parties hereto, the
Buyer shall deliver to Xxxxxxx Title Guaranty Company, as escrow agent (the
"Escrow Agent"), the sum of Fifteen Million-Four Hundred-Forty Thousand U.S.
Dollars (US$15,440,000) (the "Deposit"). The Deposit shall be held in escrow by
the Escrow Agent in an interest-bearing account (the "Escrow Fund") subject to
the Escrow Agreement substantially in the form of Exhibit C attached hereto (the
"Escrow Agreement"), and, subject to the terms and conditions set forth below
with respect to the termination of this Agreement, shall be delivered, together
with interest earned thereon, to the Sellers at Closing (as hereinafter defined)
as a credit against the Purchase Price (as hereinafter defined):
(i) In the event of the termination of this Agreement pursuant to Section
9.1(a), 9.1(d), 9.1(e) or 9.1(f), following expiration of the five (5) business
day time period provided for in Section 3(b) of the Escrow Agreement, Buyer
shall receive (in addition to those rights (if any) that it may have under
Section 9.2(b) hereof in connection with a termination pursuant to Section
9.1(f) only), as its sole and exclusive remedy (subject to this Section
1.2(a)(i) with respect to any impediment by the Sellers to delivery of the
Escrow Fund to the Buyer), the Deposit, together with all interest (if any)
actually earned thereon, and each party shall be relieved and released from any
further liability and obligation hereunder subject to any continuing obligations
pursuant to Section 4.4. In the event Buyer is entitled to receive the return
of the Deposit pursuant to this Section 1.2(a)(i), if the Sellers directly or
indirectly impede the prompt payment by the Escrow Agent from the Escrow Fund as
described in Section 1.2(a) above, the Sellers shall be obligated to pay all
costs and expenses (including legal fees and expenses) in connection with any
action, including the filing of any lawsuit or other legal action, taken to
collect such payment, together with interest on the amount of any unpaid amount
from the date such amount was required to be paid at an interest rate equal to
the prime rate published by The Wall Street Journal from time to time; and
(ii) In the event of the termination of this Agreement pursuant to Section
9.1(b) or Section 9.1(c), following expiration of the five (5) business day time
period set forth in Section 3(a) of the Escrow Agreement, the Buyer's sole right
to receive payment from the Escrow Fund shall be as set forth in Section 1.2(c)
hereof and the Sellers shall be entitled to payments from the Escrow Fund when,
as and if permitted by Section 1.2(b) hereof. Such entitlement to receive
payments from the Escrow Fund shall represent Sellers' sole and exclusive remedy
in connection with such termination (subject to this Section 1.2(a)(ii) with
respect to any Buyer impediment to payments from the Escrow Fund) and shall
constitute liquidated damages (the "Liquidated Damages"), and each party shall
be relieved and released from any further liability and obligation hereunder
subject to any continuing obligations pursuant to Section 4.4. Sellers and the
Buyer agree that actual damages accruing from such a termination of this
Agreement are incapable of precise estimation and would be difficult to prove,
that the rights stipulated in this Section 1.2 bear a reasonable relationship to
the potential injury likely to be sustained in the event of such a breach and
that the stipulated rights are intended by the parties to provide just
compensation in the event of such a breach and are not intended to compel
performance or to constitute a penalty for nonperformance. In the event Sellers
are entitled to receive the Deposit (or the Escrow Fund, as applicable) pursuant
to this Agreement or the Escrow Agreement, as applicable, if the Buyer directly
or indirectly impedes the prompt payment by the Escrow Agent from the Escrow
Fund as described in Section 1.2(b) below, the Buyer shall be obligated to pay
all costs and expenses (including legal fees and expenses) in connection with
any action, including the filing of any lawsuit or other legal action, taken to
collect such payment, together with interest on the amount of any unpaid amount
from the date such amount was required to be paid at an interest rate equal to
the prime rate published by The Wall Street Journal from time to time. The
parties hereby acknowledge that the agreements contained in this Section 1.2 are
an integral part of the transactions contemplated by this Agreement.
(b) In the event of a termination described in Section 1.2(a)(ii) hereof,
following the expiration of the five (5) business day time period set forth in
Section 3(a) of the Escrow Agreement (if applicable), the Buyer and the Sellers
agree that the Escrow Agent may not make payments from the Escrow Fund to Buyer
or the Sellers except as provided in Section 1.2(c), with respect to the Buyer,
and this Section 1.2(b), with respect to the Sellers. The Escrow Fund or any
portion thereof shall not be released to the Sellers unless the Escrow Agent
receives any one or combination of the following: (x) a letter from REITCO's
certified public accountants indicating the maximum amount that can be paid by
the Escrow Agent to the Sellers without causing REITCO to fail to meet the
requirements of Sections 856(c)(2) and (3) of the Internal Revenue Code of 1986,
as amended (the "Code") determined as if the payment of such amount did not
constitute income described in Sections 856(c)(2)(A)-(H) or 856(c)(3)(A)-(I) of
the Code ("Qualifying Income"), as determined by REITCO's certified public
accountant, or a subsequent letter from REITCO's accountants revising such
amount, in which case the Escrow Agent will release to the Sellers the amount(s)
so specified in said accountants' letters, or (y) a letter from REITCO's counsel
indicating that REITCO received a ruling from the Internal Revenue Service (the
"IRS") holding that the receipt by REITCO of the amounts from the Escrow Fund
would either constitute Qualifying Income or would be excluded from gross income
within the meaning of Section 856(c)(2) and (3) of the Code (or alternatively,
REITCO's legal counsel has rendered a legal opinion to REITCO to the effect that
the receipt by the Sellers of the amounts from the Escrow Fund would either
constitute Qualifying Income or would be excluded from gross income within the
meaning of Sections 856(c)(2) and (3) of the Code), in which case the Escrow
Agent will release to the Sellers the amount of the Escrow Fund so specified in
said accountants' letters. The Buyer agrees to amend this Section 1.2 at the
request of REITCO as may reasonably be necessary (and without additional cost,
burden or liability to the Buyer, in excess of de minimis amounts) in order to
(i) maximize the portion of the Escrow Fund that may be distributed to the
Sellers hereunder without causing REITCO to fail to meet the requirements of
Sections 856(c)(2) and (3) of the Code, (ii) improve REITCO's chances of
securing a favorable ruling described in this Section 1.2(b), or (iii) assist
REITCO in obtaining a favorable legal opinion from its counsel as described in
this Section 1.2(b); provided that REITCO's legal counsel has rendered a legal
opinion to REITCO to the effect that such amendment would not cause REITCO to
fail to meet the requirements of Section 856(c)(2) or (3) of the Code.
(c) Any portion of the foregoing Escrow Fund remaining on the fifteenth
anniversary of the date of its establishment will be released by the Escrow
Agent to the Buyer.
Section 1.3 Purchase Price; Closing Adjustment.
(a) Subject to the terms and conditions set forth in this Agreement, at the
Closing, the Buyer shall pay, or cause to be paid, to REITCO and OPCO, in
accordance with the terms of this Agreement, the aggregate amount of Three
Hundred Ninety-One Million Two Hundred Seventy-Eight Thousand U.S. Dollars
(US$391,278,000), subject to Section 4.13, minus the sum as reflected on the
Closing Balance Sheet of (i) long-term debt, less current portion, (ii) capital
lease obligations, less current portion, and (iii) deferred purchase price
liabilities, less current portion (the resulting amount shall be referred to as
the "Purchase Price"). At the Closing, the Buyer shall pay, or cause to be
paid, the Purchase Price (A) by the Escrow Agent delivering to the Sellers the
Deposit, together with interest earned thereon, and (B) by wire transfer of
immediately available funds to a bank account or accounts jointly designated by
the Sellers in an amount equal to the Purchase Price, less the Deposit and
interest earned thereon delivered by the Escrow Agent to the Sellers.
(b) Within forty-five (45) days after the Closing Date, Sellers shall
prepare and Pricewaterhouse Coopers LLP shall deliver to the Buyer an audited
combined consolidated balance sheet of the Acquired Companies as of the Closing
Date (the "Closing Balance Sheet"), prepared in accordance with generally
accepted accounting principles in the United States, as in effect from time to
time, applied on a consistent basis ("GAAP"), which sets forth the book values
of the assets and the liabilities of the Acquired Companies as of the Closing
Date, and a calculation of the Closing Adjustment to the Purchase Price. The
"Closing Adjustment" shall be a positive or negative number equal to (A)(i) the
sum of the book values determined in accordance with GAAP of: (a) cash and cash
equivalents less $5,278,000 (which may be a negative number), plus (b) accounts
receivable (excluding receivables over 90 days old), inventory, prepaid expenses
and other current assets, current portion of notes receivable (net), and notes
receivable (net) (representing the long-term portion of notes receivable related
to membership sales) as included in the Closing Balance Sheet, minus (ii) the
sum of the balances determined in accordance with GAAP of: accounts payable,
accrued payroll and related expenses, other current liabilities, deferred
revenue (excluding deferred revenue related to membership initiation fees),
income taxes payable, accrued property taxes, accrued sales tax, current portion
of deferred purchase price, current portion of long term debt, current portion
of capital lease obligations, minority interest, accrued rent and any
inter-company debt, as included in the Closing Balance Sheet; provided, however,
that in no event shall amounts (if any) which may be or may become due and
payable under the Retention Bonuses (as defined in Section 2.5(d) hereof) or the
Severance Arrangements (as defined in Section 2.5(d) hereof) be included,
through accrual or otherwise, in the calculation of the Closing Adjustment.
Notwithstanding the actual date of the Closing, in the event the Closing occurs
after March 31, 1999, the Closing Adjustment shall be calculated as of March 31,
1999.
(c) The Buyer and their independent public accountants, KPMG Peat Marwick,
LLP, shall be entitled to make an independent review of the Closing Balance
Sheet and related calculation of the Closing Adjustment and shall, during the
fifteen (15) day period after delivery of the Closing Balance Sheet and related
calculation of the Closing Adjustment (the "Review Period"), have access to all
relevant work papers of Pricewaterhouse Coopers LLP used to audit the Closing
Balance Sheet and the Closing Adjustment.
(d) Before expiration of the Review Period, the Buyer shall deliver to the
Sellers its objection, if any, in writing to the calculation of the Closing
Adjustment, together with details of the disputed items (the "Disputed Items")
set forth in the Closing Balance Sheet and the proposed adjustments to such
items. If the Buyer fails to provide notice of objection prior to the end of
the Review Period, then the Closing Balance Sheet and the calculation of the
Closing Adjustment by Pricewaterhouse Coopers LLP shall be final and binding on
all the parties. If the Buyer so notifies the Sellers prior to the end of the
Review Period of the Buyer's disapproval of the calculation of the Closing
Adjustment or the Closing Balance Sheet audited by Pricewaterhouse Coopers
LLP, then the Buyer and the Sellers shall attempt to reach agreement with
respect to the Disputed Items. In the event that the Buyer and the
Sellers are unable to reach agreement on the Disputed Items, then either
shall be entitled to refer the matter to a nationally recognized accounting
firm, independent of the Sellers and the Buyer, mutually agreed upon by the
Buyer and the Sellers, provided, that if the Buyer and the Sellers are
unable to agree upon such accounting firm within a period of fifteen (15)
days from the receipt by the Sellers of the Buyer's objection, such accounting
firm shall be chosen at random by the Buyer and the Sellers from among the "Big
Five" accounting firms which are independent of the Buyer and the Sellers
(the "Arbitrating Accountant"). The Arbitrating Accountant shall determine
the Disputed Items and calculate the Closing Adjustment within twenty
(20) days after the Disputed Items are submitted to them, and such
determination shall be final and binding upon all the parties. The fees and
expenses of the Arbitrating Accountants shall be paid 50% by the Buyer and 50%
by the Sellers.
(e) The amount of the Closing Adjustment as finally determined shall be paid
in cash, within five (5) business days after final determination of the Closing
Adjustment. If the Closing Adjustment is a positive number, then the Buyer
shall promptly pay to the Sellers by wire transfer of immediately available
funds to a bank account or accounts jointly designated by the Sellers the
dollar amount of the Closing Adjustment. If the Closing Adjustment is a
negative number, then the Sellers shall promptly pay to the Buyer by wire
transfer of immediately available funds to a bank account or accounts designated
by the Buyer the amount of such deficit.
Section 1.4 Closing. The closing of the Transfer and delivery of all
documents and instruments necessary to consummate the transactions contemplated
by this Agreement (the "Closing") shall be held at the offices of Xxxxxxx,
Procter & Xxxx LLP, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, xx March 31, 1999
(with a complete pre-closing on or about March 24, 1999 or, if the Closing
occurs after March 31, 1999, such pre-closing shall occur approximately one (1)
week prior to such extended Closing Date) or at such other time or such other
place as the Buyer and the Sellers may agree, but in no event later than March
31, 1999 except as expressly permitted pursuant to this Agreement. The Sellers
shall have the right to postpone the Closing for an additional period of time
not exceeding (i) forty-five (45) days by giving written notice to the Buyer if
the Sellers' failure to close is not as a result of a breach of Sellers'
covenants or other agreements contained in this Agreement or (ii) ninety (90)
days by giving written notice to the Buyer in order to permit the satisfaction
of the conditions precedent to the obligations of the Buyer set forth in Section
7.1 or Section 7.3 hereof. The date on which the Closing is actually held
hereunder is sometimes referred to herein as the "Closing Date." The Closing
will be deemed to be effective for purposes of this Agreement as of the opening
of business on the Closing Date. The Sellers agree (i) to provide notice of an
extension of the Closing Date beyond March 31, 1999 on or before March 16, 1999,
and (ii) in the event the Closing Date is extended, to provide notice of the
proposed Closing Date at least fifteen (15) days prior to such proposed Closing
Date.
Section 1.5 Transactions at Closing.
(a) At the Closing, the Sellers will deliver or cause to be delivered to the
Buyer the following:
(i) stock certificates, evidencing all, and not less than all, of the
Acquired Shares, in each case duly endorsed in blank or accompanied by stock
powers duly executed in blank, and with all required stock transfer tax stamps
affixed, or if such stock certificates are not then available, affidavits of
loss and indemnity agreements in lieu thereof in form and substance reasonably
acceptable to the Buyer;
(ii) all minute books and stock transfer books of each of the Acquired
Companies;
(iii) one or more receipts acknowledging receipt of the aggregate Purchase
Price;
(iv) a legal opinion addressed to the Buyer, in form reasonably acceptable
to the Buyer, that each of the Sellers is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware
and has all the requisite corporate power and authority to enter into this
Agreement, to carry out its obligations hereunder and to consummate the
transactions contemplated hereby;
(v) REITCO shall contribute the Note dated as of August 7, 1998 in the
principal amount of $6,215,720, together with an assignment, in recordable form,
the related Leasehold Deed of Trust dated as of August 7, 1998 to either MGG or
MGG II (or their designee); and
(vi) each of the certificates and other documents required to be delivered
at the Closing pursuant to Section 7.3 hereof.
(b) At the Closing, the Buyer will deliver or cause to be delivered to the
Sellers the following:
(i) the Purchase Price, by wire transfer in cash of immediately available
funds pursuant to, and in the manner set forth in, Section 1.3 hereof; and
(ii) each of the certificates and other documents required to be delivered
at the Closing pursuant to Section 7.2 hereof.
Section 1.6 Allocation of Purchase Price; Other Matters.
(a) The allocation of the Purchase Price to the Acquired Shares of each of
MGG, Cobblestone and MGG II shall be in accordance with Schedule 1.6(a) hereto,
which schedule has been prepared by Sellers and approved by Buyer in connection
herewith. Any adjustments to the Purchase Price after the Closing pursuant to
Section 1.3 hereof (or otherwise) shall be equitably apportioned to the Purchase
Price of the Acquired Shares of each of MGG, Cobblestone and MGG II as set forth
in Schedule 1.6(a) hereto. Such allocation (and any subsequent adjustment
thereto) shall be binding upon Buyer and Sellers for all purposes (including
accounting, financial, regulatory reporting and tax purposes except to the
extent that the Sellers' and Buyer's independent public accountants mutually
agree that such allocation would be inappropriate for accounting, financial
and/or regulatory reporting purposes). Buyer and Sellers agree to file their
respective tax returns in accordance with such allocation.
(b) Buyer and REITCO agree that, the sale of the capital stock of MGG and
MGG II shall be structured such that immediately prior to the Closing of Buyer's
purchase of MGG's and MGG II's capital stock, each of MGG and MGG II shall be
deemed, for federal income tax purposes, to have been incorporated in a taxable
transaction resulting in (i) the recognition of gain or loss to REITCO on such
deemed incorporation under Section 1001 of the Code and (ii) the tax basis of
the assets of MGG and MGG II being determined under Section 1012 of the Code.
Buyer and REITCO further agree that the fair market value of the stock deemed
issued by MGG and MGG II to REITCO in the deemed incorporation transactions
shall be equal to the portion of the Purchase Price allocated to the Acquired
Shares of such entity in Schedule 1.6(a); REITCO will prepare an allocation of
the purchase price among the assets deemed acquired by MGG and MGG II in the
deemed incorporation transactions within 60 days after the Closing (the
"Allocation Schedule"), based upon the rules in Section 1060 of the Code and the
fair market values of the MGG and MGG II assets set forth in Schedule 1.6(b)
hereto, which schedule has been prepared by Sellers and approved by Buyer in
connection herewith; and REITCO shall file, and Buyer shall cause MGG and MGG II
to file, all relevant tax returns (including Form 8594) in accordance with such
Allocation Schedule.
Section I.7 Time of the Essence. The parties hereto acknowledge and agree
that, subject only to the express adjournment rights contained herein, time is
of the essence in consummating the purchase and sale of the Acquired Shares and
the delivery of the Purchase Price.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Except as disclosed in the schedules attached hereto, the Sellers jointly and
severally represent and warrant to the Buyer as follows:
Section 2.1 Organization of the Sellers and the Acquired Companies;
Authority.
(a) Each of the Sellers is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and has all the
requisite corporate power and authority to enter into this Agreement, to carry
out its obligations hereunder and to consummate the transactions contemplated
hereby. Each Acquired Company is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of organization
and has all the requisite corporate power and authority to carry on its business
as now being conducted and to own, operate and lease the properties and assets
owned, operated and leased by it. Each of the Acquired Companies is qualified
to do business and is in good standing in each jurisdiction in which the nature
of its business requires it to be so qualified, except to the extent the failure
to so qualify would not, either individually or in the aggregate, have a
Material Adverse Effect (as hereinafter defined).
(b) The execution and delivery of this Agreement, the performance by the
Sellers of their obligations hereunder and the consummation of the transactions
contemplated hereby have been duly authorized by all requisite corporate action
on the part of the Sellers. This Agreement has been duly executed and delivered
by the Sellers and assuming the due authorization, execution and delivery of
this Agreement by the Buyer, this Agreement constitutes a legal, valid and
binding obligation of the Sellers, enforceable against the Sellers in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally or by general equitable principles.
Section 2.2 Capitalization; Subsidiaries.
(a) The authorized, issued and outstanding capital stock of each of the
Companies is set forth on Schedule 2.2(a). All of the issued and outstanding
shares of capital stock of each of the Companies are duly authorized, validly
issued, fully paid and nonassessable. None of the issued and outstanding shares
of capital stock of the Companies were issued in violation of any preemptive
rights. Except as set forth on Schedule 2.2(a) hereto, there are no outstanding
options, warrants or other rights of any kind to acquire any additional shares
of capital stock of any of the Companies or securities convertible into or
exchangeable for, or which otherwise confer on the holder thereof any right to
acquire, any such additional shares, nor are any of the Companies committed to
issue any such option, warrant, right or security. Except as set forth on
Schedule 2.2(a) hereto, there are no outstanding oral or written contractual
obligations of the Companies to repurchase, redeem or otherwise acquire any of
the Acquired Shares, or to provide funds to, or to make any investment (in the
form of a loan, capital contribution or otherwise) in, any other Person (as
hereinafter defined) in each case except in connection with the making of loans
and the entering into of leases in the ordinary course of business consistent
with past practice. Except as set forth on Schedule 2.2(a), (i) the Sellers
own, or will own as of the Closing Date, the Acquired Shares, free and clear of
any and all liens, claims, security interests or options, except for (A)
Encumbrances (as hereinafter defined) arising out of, under or in connection
with this Agreement, and (B) Encumbrances that will be released at or prior to
the Closing, and the Sellers have full legal right, power and authority to sell,
transfer and convey the Acquired Shares to the Buyer in the manner contemplated
by this Agreement, except for restrictions on transfer under applicable federal
and state securities laws, and (ii) except as set forth on Schedule 2.2(b), the
Companies do not have, directly or indirectly, any equity interest in any other
corporation, joint venture, partnership, limited liability company or other
entity. Upon consummation of the transactions contemplated by this Agreement
and registration of the Acquired Shares in the name of the Buyer in the stock
records of each respective Company, the Buyer will own all of the issued and
outstanding capital stock of the Companies free and clear of all Encumbrances,
other than any Encumbrances resulting from any facts or circumstances relating
solely to the Buyer (including, without limitation, its sources of financing).
(b) Schedule 2.2(b) sets forth a true and complete list of all Subsidiaries
(as hereinafter defined) and their name, jurisdiction and date of incorporation
or formation, their authorized capital stock, partnership capital or equivalent,
the number and type of their issued and outstanding shares of capital stock,
partnership interests or similar ownership interests and the current ownership
of such shares, partnership interests or similar ownership interests. None of
the issued and outstanding shares of capital stock of the Subsidiaries were
issued in violation of any preemptive rights. All of the issued and outstanding
shares of capital stock of each of the Subsidiaries are duly authorized, validly
issued, fully paid and nonassessable. Except as set forth on Schedule 2.2(b)
hereto, there are no outstanding options, warrants or other rights of any kind
to acquire any additional shares of capital stock of any of the Subsidiaries or
securities convertible into or exchangeable for, or which otherwise confer on
the holder thereof any right to acquire, any such additional shares, nor are any
of the Subsidiaries committed to issue any such option, warrant, right or
security. Except as set forth on Schedule 2.2(b) hereto, there are no
outstanding oral or written contractual obligations of the Subsidiaries to
repurchase, redeem or otherwise acquire any shares of common stock or other
ownership interest in the Subsidiaries, or to provide funds to, or to make any
investment (in the form of a loan, capital contribution or otherwise) in, any
other Person in each case except in connection with the making of loans and the
entering into of leases in the ordinary course of business consistent with past
practice. Except as set forth on Schedule 2.2(b), the Acquired Companies own
all of the outstanding capital stock of their respective Subsidiaries free and
clear of any and all liens, claims, security interests or options, except for
(i) Encumbrances arising out of, under or in connection with this Agreement, and
(ii) Encumbrances that will be released at or prior to the Closing.
(c) Since May 29, 1998, all material corporate actions taken by each
Subsidiary have been duly authorized and the Subsidiary has not taken any action
that in any material respect conflicts with, constitutes a default under or
results in a violation of any provision of its charter or by-laws (or similar
organizational documents). True and complete copies of the charter and by-laws
(or similar organizational documents), in each case as in effect on the date
hereof, of each Subsidiary have been made available by the Sellers to the Buyer.
Section 2.3 No Conflict. Except as provided in Schedule 2.3, and except as
may result from any facts or circumstances relating solely to the Buyer
(including, without limitation, its sources of financing), and assuming that all
consents, approvals, authorizations and other actions set forth in Section 2.6
have been obtained and all filings and notifications set forth on Schedule
2.6(a) have been made, neither the Sellers nor the Acquired Companies are
subject to or bound:
(a) (i) by any provision of any law, statute, rule, regulation or judicial
or administrative decision (with respect to the Sellers and the Acquired
Companies, but not with respect to their respective assets or properties), and
(ii) to Sellers' knowledge (as hereinafter defined) by any provision of any law,
statue, rule, regulation or judicial or administrative decision (with respect to
the assets and properties of the Sellers and the Acquired Companies),
(b) by any provisions of the articles or certificate of incorporation or
by-laws (or similar organizational, constitutive or governing document) of the
Sellers' or any Acquired Company,
(c) to Sellers' Knowledge (as hereinafter defined), by any provision of any
mortgage, deed of trust, lease, note, bond, indenture, license, permit, trust,
contract, agreement, sublease, franchise or other instrument or arrangement
described on Schedule 2.12(a) to which the Sellers or the Acquired Companies are
a party as it relates to the business of the Acquired Companies or by which any
of the Acquired Shares or any shares of the Subsidiaries or any of such assets
or properties is bound or affected,
(d) by any provision of any mortgage, deed of trust, lease, note, bond,
indenture, license, permit, trust, contract, agreement, sublease, franchise or
other instrument or arrangement which is not required to be disclosed on
Schedule 2.12(a) to which the Sellers or the Acquired Companies are a party as
it relates to the business of the Acquired Companies or by which any of the
Acquired Shares or any shares of the Subsidiaries or any of such assets or
properties is bound or affected,
(e) by any provisions of any shareholders' agreement or partnership
agreement, or
(f) by any provision of any judgment, order, writ, injunction or decree of
any court, governmental body, administrative agency or arbitrator,
that would prevent, violate or conflict with or under which there would be a
default as a result of the execution, delivery or performance of this Agreement,
nor, is the consent of any person or entity under any material contract or
agreement, which material contract or agreement is not identified in any
Schedule attached to this Agreement, or under federal or state law, which has
not been obtained prior to the Closing, required for the execution, delivery,
and performance by the Sellers of this Agreement and the transactions
contemplated thereby, except for violations, defaults, conflicts or failures to
obtain consents or to make filings or provide notices which would not have (i) a
Material Adverse Effect or (ii) a material adverse effect on the ability of the
Sellers to perform their obligations under this Agreement.
Section 2.4 Financial Statements; Undisclosed Liabilities; Financial
Condition.
(a) Attached hereto as Schedule 2.4 is the audited (i) Combined Consolidated
Balance Sheet (the "October Balance Sheet"), (ii) Combined Consolidated
Statement of Operations, (iii) Combined Consolidated Statement of The Meditrust
Companies' Investment, and (iv) Combined Consolidated Statement of Cash Flows,
together with Notes to Combined Consolidated Financial Statements for the
Companies together with their subsidiaries as of October 31, 1998 (collectively,
the "October Financial Statements") which (i) includes all adjustments,
consisting of normal recurring adjustments necessary for the fair presentation
of financial position (none of which are material) in accordance with GAAP
consistently applied, except as noted on Schedule 2.4 hereto, and (ii) present
fairly, in all material respects, the financial position and the results of
operations of the Acquired Companies, on a combined consolidated basis with
their subsidiaries as of October 31, 1998 and for the periods covered by such
statements.
(b) Sellers have made available to Buyer copies of each management letter or
other letter delivered to any of the Acquired Companies by their independent
auditors since May 29, 1998 in connection with their audited financial
statements or relating to any review by such independent auditors of the
internal controls of the Acquired Companies during the period ended October 31,
1998 or thereafter, and has made, or will make, available for inspection all
material reports and working papers produced or developed by their independent
auditors (subject to the Buyer's execution and delivery of customary indemnity
agreements for the benefit of such independent auditors) or management in
connection with their examination of such financial statements.
(c) Since May 29, 1998, each of the Acquired Companies have maintained
records relating to their businesses that accurately and validly reflect their
respective transactions in all material respects, and accounting controls
sufficient to insure that such transactions are (i) executed in accordance with
management's general or specific authorization and (ii) recorded in conformity
with GAAP (subject to customary end of period adjustments).
(d) As of the date hereof, none of the Acquired Companies have liabilities,
except for (i) liabilities stated or adequately reserved against on the October
Balance Sheet, (ii) liabilities which arose in the ordinary course of business
after October 31, 1998 consistent with past practice that in the aggregate do
not exceed $250,000 (excluding any liabilities which are included in the Closing
Adjustment), (iii) liabilities which will not have a Material Adverse Effect,
(iv) liabilities set forth on Schedules 2.4 or 2.7 and (v) liabilities under the
Acquired Companies' (A) existing contracts and agreements disclosed pursuant to
Section 2.12(a) hereof or (B) not required to be disclosed pursuant to Section
2.12(a) hereof. For purposes of this paragraph, "liabilities" means, all
liabilities of the Acquired Companies of any nature, whether accrued, absolute,
contingent or otherwise, asserted or unasserted, (including, without limitation,
liabilities as guarantor or otherwise with respect to obligations of others, or
liabilities for taxes due or then accrued or to become due or contingent or
potential liabilities relating to activities of the Acquired Companies or the
conduct of their business prior to the date hereof regardless of whether claims
in respect thereof had been asserted as of such date).
Section 2.5 Absence of Certain Changes. Except as set forth on Schedule
2.5, from October 31, 1998 to the date of this Agreement, the Acquired Companies
have operated only in the ordinary course of business consistent with past
practice and there has not been any of the following:
(a) change in, or effect on, the Acquired Companies resulting in a Material
Adverse Effect;
(b) change in any Acquired Company's authorized or issued capital stock;
grant of any option, right to purchase or similar right regarding the capital
stock of any Acquired Company; grant of any registration rights by any Acquired
Company; purchase, redemption, retirement, or other acquisition by any Acquired
Company of any such capital stock; or declaration or payment of any dividend or
other distribution or payment in respect of the capital stock of any Acquired
Company, except that cash balances of the Subsidiaries are concentrated daily in
the Companies' accounts, no material cash balances are held by any of the
Acquired Companies and no intercompany payable or receivable is shown on the
October Balance Sheet in connection therewith;
(c) amendment to the certificate or articles of incorporation or bylaws of
any Acquired Company, or any action with respect to the certificate of
incorporation or bylaws of any Acquired Company;
(d) payment of any bonuses, or increase in salaries or other compensation,
by any Acquired Company to any of its directors, officers, or employees, except
for annual bonus awards and increases in salaries consistent with past practice;
or entry into any employment, severance, retention plans, stay bonus plans or
similar agreement or understanding with any director, officer or employee except
for (i) any severance agreement or understanding under and in accordance with
those severance agreements, plans, policies and understandings ("Severance
Arrangements") set forth on Schedule 2.5 (true and correct copies of the form of
all such written agreements (except for exhibits thereto setting forth the
Retention Bonuses referred to in subclause (ii) of this Section 2.5(d)) are
attached hereto as Schedule 2.5) and (ii) retention incentive payments (the
"Retention Bonuses") which will be paid by the Sellers at or prior to the
Closing (which Retention Bonuses may be reflected in the written agreements
evidencing the Severance Arrangements; provided, that, notwithstanding this
inclusion in the agreements evidencing the Severance Arrangements, the Sellers
shall be liable for all such Retention Bonuses);
(e) adoption of, or increase in the schedule of payments or benefits under,
any Benefit Plan (as hereinafter defined), for or with any officer, director or
employee of the Acquired Companies (except for any officer, director or key
employee newly employed or promoted since such date, which officers, directors
or key employees so newly employed or promoted are identified on Schedule 2.5
(excluding officers, directors or employees who are not compensated directly by
the Acquired Companies));
(f) damage to or destruction or loss of any asset or property of an Acquired
Company, whether or not covered by insurance, which has had a Material Adverse
Effect;
(g) sale, purchase, lease, license or other transfer of any share of capital
stock of any Acquired Company or mortgage, pledge, or imposition of any
Encumbrance on any of the shares of capital stock of any Acquired Company;
(h) incurrence of indebtedness or guarantee of debt or other liability of
any third party by any Acquired Company;
(i) material change in the accounting methods or principles used by the
Sellers (with respect to the assets, liabilities, financial condition or results
of operations of any Acquired Company) or any Acquired Company except for (A)
write-downs or write-offs in the value of assets as required or permitted by
GAAP and as set forth on Schedule 2.5, or (B) such adjustments as required by
GAAP as a result of the transactions contemplated by this Agreement;
(j) purchases, leases, sales or dispositions of any asset or property with a
purchase price in excess of $75,000 individually and $250,000 in the aggregate,
purchases or leases of any capital asset for an amount of more than $75,000
individually and $250,000 in the aggregate except in each case as provided in
the Acquired Companies' capital budget attached as Schedule 2.5 and Schedule
4.1(c) or the voluntary grant of mortgages, pledges or liens of any of its
properties or assets, except for any such mortgage, pledge or lien which, by its
terms, will be terminated or otherwise be extinguished at or prior to the
Closing;
(k) any capital expenditures or commitment for any capital expenditure in
excess of $75,000 individually or $250,000 in the aggregate, except in
compliance with the capital budgets attached as Schedule 2.5 and Schedule
4.1(c); or
(l) entering into an agreement, whether oral or written, by the applicable
party bound by clauses (a) through (k), as the case may be, to do any of the
actions described in clauses (a) through (k).
Section 2.6 Consents and Approvals.
(a) Except as set forth on Schedule 2.6(a), the execution, delivery and
performance of this Agreement by the Sellers will not, as of the Closing Date,
require any consent, approval, authorization or other action by, or filing with
or notification to, any federal, state, local, or any foreign government,
governmental, regulatory or administrative authority, agency or commission or
any court, tribunal, or judicial or arbitral body, excluding those
municipalities or other governmental entities that are parties to those ground
leases disclosed in Schedule 2.12(a), in their capacity as lessors thereunder,
and the City of Escondido, in its capacity as a lender and/or creditor under
those agreements disclosed in Schedule 2.12(a) (a "Governmental Authority"),
except (i) the notification requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), if applicable, (ii) where
failure to obtain such consent, approval, authorization or action, or to make
such filing or notification, would not (A) have a Material Adverse Effect, (B)
delay or prevent the consummation of the transactions contemplated by this
Agreement, or (C) have a material adverse effect on the ability of the Sellers
to perform their obligations under this Agreement, and (iii) as may be necessary
as a result of any facts or circumstances relating solely to the Buyer
(including, without limitation, its sources of financing).
(b) Except as set forth on Schedule 2.6(b), the execution, delivery and
performance of this Agreement by the Sellers will not, as of the Closing Date,
require any third-party consents, approvals, authorizations or actions, except
where failure to obtain such consents, approvals, authorizations or actions
would not (i) have a Material Adverse Effect, (ii) delay or prevent the
consummation of the transactions contemplated by this Agreement, or (iii) have a
material adverse effect on the ability of the Sellers to perform their
obligations under this Agreement.
Section 2.7 Litigation. Except as set forth in Schedule 2.7, there is no
action, suit or proceeding, claim, arbitration or investigation against an
Acquired Company pending or, to the Sellers' Knowledge, threatened, which, if
adversely determined, (a) would have a Material Adverse Effect, (b) would delay
or prevent the consummation of the transactions contemplated by this Agreement,
or (c) would have a material adverse effect on the ability of the Sellers to
perform their obligations under this Agreement.
Section 2.8 Taxes.
(a) Except as set forth on Schedule 2.8 or as would not have a Material
Adverse Effect:
(i) The Acquired Companies have paid or caused to be paid and will as of the
Closing Date pay or cause to be paid all Taxes (as defined in Section 2.8(b))
required to be so paid prior to the date of this Agreement and prior to the
Closing Date and have made provision, in accordance with GAAP, for all Taxes
owed or accrued through the date of this Agreement.
(ii) The Acquired Companies have timely filed or been included in, or will
timely file or be included in, all material Tax Returns (as defined in Section
2.8(b)) required to be filed by them or in which they are required to be
included with respect to Taxes for any period ending on or before the date of
this Agreement and on or before the Closing Date, taking into account any
extension of time to file granted to or obtained on behalf of the Sellers or the
Acquired Companies. All such filed Tax Returns are complete and accurate in all
material respects.
(iii) Neither the Internal Revenue Service (the "IRS") nor any other
Governmental Authority is asserting as of the date of this Agreement by written
notice to Sellers or the Acquired Companies or, to the Sellers' Knowledge,
threatening as of the date of this Agreement to assert against the Sellers or
the Acquired Companies, any deficiency or claim for any material amount of
additional Taxes.
(iv) No federal, state, local or foreign audits or other administrative
proceedings or court proceedings are pending as of the date of this Agreement
with regard to any Taxes or Tax Returns of any of the Sellers or the Acquired
Companies and none of Sellers or the Acquired Companies has received a written
notice prior to the date of this Agreement of any actual or threatened audits or
proceedings or is otherwise aware of any such audits or proceedings.
(v) There are no agreements, waivers or arrangements currently in effect
which extend the statutory period of limitation applicable to any claim for, or
the period for the collection or assessment of, Taxes due from or with respect
to the Acquired Companies for any taxable period, and no powers of attorney have
been granted by or with respect to the Acquired Companies with respect to Taxes
which are currently in force. No closing agreement pursuant to Section 7121 of
the Code (or any predecessor provision) or any similar provision of any state,
local, or foreign law has been entered into by or with respect to the Acquired
Companies which is currently in force or effect.
(vi) As of the Closing Date, MGG, MGG II and their respective Subsidiaries
will be "Qualified REIT Subsidiaries" within the meaning of Section 856(i) of
the Code.
(b) "Taxes" shall mean any and all taxes, charges, fees, levies or other
assessments, including, without limitation, income, gross receipts, excise, real
or personal property, sales, withholding, social security, retirement,
unemployment, occupation, service, use, license, net worth, payroll, franchise,
transfer and recording bites, fees and charges, imposed by the IRS or any taxing
authority (whether domestic or foreign including, without limitation, any state,
county, local or foreign government or any subdivision or taxing agency thereof
(including a United States possession)), whether computed on a separate,
consolidated, unitary, combined or other basis; and such term shall include any
interest whether paid or received, fines, penalties or additional amounts
attributable to, or imposed upon, or with respect to, any such taxes, charges,
fees, levies or other assessments.
"Tax Return" shall mean any report, return, document, declaration or other
information or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Taxes, including, without
limitation, information returns, any document, with respect to or accompanying
payments of estimated taxes, or with respect to or accompanying requests for the
extension of time in which to file any such, report, return, document,
declaration or other information.
Section 2.9 Employee Benefit Plans. All of the employee benefit plans,
programs and arrangements maintained for the benefit of any current or former
employee, officer or director or any dependents or beneficiaries of such
individuals of any of the Acquired Companies (the "Benefit Plans") are listed on
Schedule 2.9. With respect to such Benefit Plans, except for such matters as,
individually or in the aggregate, would not have a Material Adverse Effect or as
set forth in Schedule 2.9, (a) each Benefit Plan and any related trust intended
to be qualified under Sections 401(a), 501(a) or 501(c) of the Code has received
a favorable determination letter from the IRS that it is so qualified and
nothing has occurred since the date of such letter that could reasonably be
expected to adversely affect the qualified status of such Benefit Plan or
related trust, (b) each Benefit Plan has been operated in all material respects
in accordance with the terms and requirements of applicable law including
requirements under ERISA and the Code (including COBRA requirements under
Section 4980B of the Code), (c) none of the Acquired Companies has incurred any
direct or indirect liability under, arising out of or by operation of Title I or
Title IV of the Employee Retirement and Income Security Act of 1974, as amended
("ERISA"), in connection with any Benefit Plan or other retirement plan or
arrangement, and to Sellers' Knowledge no fact or event exists that could
reasonably be expected to give rise to any such liability, (d) all contributions
due and payable on or before the date of this Agreement in respect of each
Benefit Plan have been made in full and in proper form and as of the Closing,
neither the Acquired Companies nor Buyer shall have or assume any liability that
is unfunded or unaccrued related to any Benefit Plan, (e) none of the Acquired
Companies have ever sponsored or been obligated to contribute to any
"multiemployer plan" (as defined in Section 3(37) of ERISA), "multiple employer
plan" (as defined in Section 413 of the Code) or "defined benefit plan" (as
defined in Section 3(35) of ERISA) and/or Section 412 of the Code, or "excess
benefit plan" or "top-hat plan" as described under ERISA Sections 3(36) and
201(2), (f) except as set forth on Schedule 2.9 and, except as otherwise
required under ERISA, the Code and applicable state laws, no Benefit Plan
currently or previously maintained by the Acquired Companies provides any
post-retirement health or life insurance benefits, and none of the Acquired
Companies maintains any obligations to provide post-retirement health or life
insurance benefits in the future, (g) all reporting and disclosure obligations
imposed under ERISA and the Code have been satisfied with respect to each
Benefit Plan, (h) each Benefit Plan maintained for the benefit of any current or
former employee, officer or director of any of the Acquired Companies is listed
on Schedule 2.9 and true and complete copies of the current plan documents for
each such Benefit Plan have been provided to Buyer, and (i) except as set forth
on Schedule 2.9, no benefit or amount payable or which may become payable by the
Acquired Companies pursuant to any Benefit Plan, agreement or contract with any
employee, shall constitute an "excess parachute payment," within the meaning of
Section 280G of the Code, which is or may be subject to the imposition of any
excise tax under Section 4999 of the Code or which could not reasonably be
expected to be deductible by reason of Section 280G of the Code. "ERISA
Affiliate" means any corporation, trade or business the employees of which,
together with the employees of the Acquired Companies, are required to be
treated as employed by a single employer under the provisions of ERISA or Code
Section 414. Neither the Acquired Companies nor Buyer shall have any liability
on or after the Closing with respect to any employee benefit plan, arrangement,
program or policy maintained or sponsored by any ERISA Affiliate, except for the
Benefit Plans listed on Schedule 2.9.
Section 2.10 Assets; Properties. Except as disclosed herein or as would
individually or in the aggregate not have a Material Adverse Effect, the Sellers
represent as follows:
(a) Marketable Title. To the Sellers' Knowledge, except for Property
Restrictions (as defined in Section 2.10(c) hereof) and except as disclosed on
Schedule 2.10(a), the Acquired Companies own good and marketable fee simple
title to all of the Owned Properties, free and clear of any liens or security
interests. For purposes of this Agreement "Owned Properties" shall mean: (i)
the real property set forth on Schedule 2.10(a) hereto or purchased since the
date of this Agreement (collectively, the "Land"); (ii) all existing buildings,
structures and other improvements, located upon the Land owned by the Acquired
Companies, including without limitation all clubhouse buildings, maintenance
facilities, golf courses, driving ranges, practice areas, landscaping
improvements, man-made lakes, irrigation systems (including sprinklers, pipe,
and fittings), lakeliners, pumps, flood control works, paving, walkways, road
improvements, parking facilities and all other improvements of whatever kind
owned by the Acquired Companies which have previously been made, installed or
erected and are now located on the Land (collectively, the "Improvements"); and
(iii) all appurtenances, hereditaments, easements, reversionary rights, and all
other rights, privileges, and entitlements belonging to or running with the Land
owned by the Acquired Companies.
(b) Improvements in Operable Condition. To the Sellers' Knowledge, except
for Property Restrictions and except as set forth on Schedule 2.10(b), (i) the
Acquired Company identified therein holds a good and marketable leasehold
interest (each, a "Leasehold") in the Leased Property pursuant to a valid ground
lease (each, a "Lease"), each of the Leases at present and immediately prior to
the Closing shall be in full force and effect, the Acquired Company which is the
lessee thereunder is not, nor will it be at Closing, in default under any Lease
in respect of any monetary obligation or otherwise in any material respect,
subject however to obtaining the consents identified on Schedule 2.6(b) as it
relates to the Leases, and each of the Leases represents the complete agreement
between such Acquired Company and the lessor thereunder and all material (ii)
(A) Improvements and (B) Leased Improvements are in operable condition and the
Sellers have the right to possess, occupy and operate same, free and clear of
any liens or security interests. "Leased Improvements" include all existing
buildings, structures and other improvements located upon each of the parcels of
real property comprising a golf facility leased by the Acquired Companies (the
"Leased Properties") as set forth on Schedule 2.10(b) hereto or leased since the
date of this Agreement, which buildings, structures and other improvements
include without limitation all clubhouse buildings, maintenance facilities, golf
courses, driving ranges, practice areas, landscaping improvements, man-made
lakes, irrigation systems (including sprinklers, pipes and fittings),
lakeliners, pumps, flood control works, paving, walkways, road improvements,
parking facilities, and all other improvements of whatever kind owned by the
Acquired Companies which have previously been made, installed or erected and are
now located on such Leased Properties (collectively, the "Leased Improvements,"
and together with the Leaseholds, the Improvements, the Owned Properties and the
Leased Properties, the "Properties").
(c) Property Restrictions. To the Sellers' Knowledge, except as set forth
below and as set forth on Schedule 2.10(c) hereto, the Properties are not
subject to any easements, rights of way, covenants, conditions, restrictions,
reservations, leases or other rights of occupancy, laws, ordinances and
regulations affecting building use or occupancy or reservations of an interest
in, or exception to or defect in title (collectively, "Property Restrictions"),
except for (i) Property Restrictions imposed or promulgated by law or any
Governmental Authority with respect to real property, including zoning
regulations that do not and as a consequence of the transactions contemplated
herein will not adversely affect the current use of the property, materially
detract from the value of or materially interfere with the present use of the
property, (ii) Encumbrances and Property Restrictions disclosed on existing
title policies, commitments (and the documents listed as exceptions, therein),
reports certificates of title, title opinions or current surveys (in each case
limited to only those title policies, commitments (and the documents listed as
exceptions therein), reports and surveys that were delivered or made available
to the Buyer for review prior to the date of this Agreement, but excluding any
monetary liens, vendors' liens, mechanic's and materialmen's liens, judgment
liens and other third party monetary liens except as set forth on, or securing
the debt listed on, Schedule 2.12(a)(ii)), (iii) any other item currently of
record in the applicable land or comparable real property records that does not
materially detract from the value of or materially interfere with the present
use of the applicable Property, but excluding matters currently of record which
are monetary liens, vendors' liens, mechanic's and materialmen's liens, judgment
liens and other third-party monetary liens except as set forth on Schedule
2.12(a)(ii) but only if and to the extent identified in writing by the Buyer and
received by the Sellers prior to 6:00 p.m. (local Boston, Massachusetts time) on
Wednesday, February 17, 1999, and (iv) all obligations under the existing
contracts and agreements entered into by the Acquired Companies and listed on
Schedule 2.12(a) or not required to be disclosed on such schedule, including
those mechanics', carriers', suppliers', workmen's or repairmen's liens and
other Encumbrances, Property Restrictions and other limitations of any kind, if
any, which, individually or in the aggregate, are not material in amount, do not
and as a consequence of the transactions contemplated herein will not materially
detract from the value of or materially interfere with the present use of any of
the Properties subject thereto or affected thereby, do not and as a consequence
of the transactions contemplated herein will not otherwise materially impair
business operations conducted by the Acquired Companies and which have been
incurred only in the ordinary course of business.
(d) Taxes. Except as set forth on Schedule 2.10(d) and for any proceeding
or appeal which, if determined adversely to the respective Acquired Company,
individually or in the aggregate, would not have a Material Adverse Effect,
there are no outstanding abatement proceedings or appeals to which the Acquired
Companies are a party with respect to the assessment of any of the Properties
for the purpose of real property taxes, and there are no agreements with any
Governmental Authority to which the Acquired Companies are a party with respect
to such assessments or tax rates on any of the Properties.
Section 2.11 Labor and Employment Matters.
(a) Except as set forth on Schedule 2.11(a) and as would not have a Material
Adverse Effect, the Acquired Companies are, as of the date hereof, in compliance
in all material respects with all federal, state and municipal laws respecting
employment and employment practices, terms and conditions of employment, and
wages and hours, including but not limited to ERISA, the Code, Title VII of the
Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the
Age Discrimination in Employment Act of 1967, as amended, the Americans with
Disabilities Act and the related rules and regulations adopted by those federal
agencies responsible for the administration of such laws, and there are no
arrearages in the payment of wages, social security tax or any other employment
related levy or tax.
(b) Except as set forth on Schedule 2.11(b) and as would not have a Material
Adverse Effect, none of the Acquired Companies is a party to or otherwise bound
by any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization. Except as set forth on
Schedule 2.11(b) and as would not have a Material Adverse Effect, as of the date
of this Agreement, none of the Acquired Companies is subject to any charge,
demand, petition or representation proceeding seeking to compel, require or
demand it to bargain with any labor union or labor organization nor, as of the
date of this Agreement, is there pending or, to the Sellers' Knowledge,
threatened, any material labor strike, dispute, walkout, work stoppage,
slow-down or lockout involving the Acquired Companies.
Section 2.12 Contracts and Commitments.
(a) Schedule 2.12(a) lists each of the following contracts or agreements (if
any) of each of the Acquired Companies:
(i) management contracts with respect to the Properties, and management
contracts with respect to golf course properties or facilities owned by third
parties;
(ii) all material documents evidencing or creating indebtedness for borrowed
money of the Acquired Companies with a remaining principal balance in excess of
$75,000 individually or $250,000 in the aggregate or secured by the Properties
and outstanding on the date of this Agreement which will not be retired or
repaid on or prior to the Closing Date ("Existing Debt");
(iii) partnership agreements and joint venture agreements to which any
Acquired Company is a party (and having as another party any person who is not
an Acquired Company) which requires a payment, or delivery of assets or
services;
(iv) all Leases of Leased Properties and other real property leased by the
Companies;
(v) except as set forth on Schedule 2.5, employment, severance or consulting
agreements with any director, officer or Acquired Companies Employee (as
hereinafter defined) requiring an annual payment of cash compensation in excess
of $100,000 individually;
(vi) agreements granting to any third party a first-refusal, first-offer or
other right to purchase or acquire any of the Properties or any of the Acquired
Shares;
(vii) agreements materially limiting or restricting the ability of any
Acquired Company to enter into or engage in any geographic area or line of
business; and
(viii) agreements that will not be terminated on or before the Closing
between (1) any Acquired Company and any Seller or its Affiliates (as
hereinafter defined), or (2) any Seller or its Affiliates (except for any
Acquired Company) and a third party that commit any one or more of the Acquired
Companies to pay, in the aggregate, more than $150,000.
(b) True and complete copies of the contracts and agreements disclosed
pursuant to Section 2.12(a) hereof have been made available to the Buyer.
Except as disclosed on Schedule 2.12(b) or as would not have a Material Adverse
Effect (i) each contract and agreement disclosed pursuant to Section 2.12(a)
hereof is valid and binding on the Acquired Company party thereto and, to the
Sellers' Knowledge, on the other party or other parties thereto, and is in full
force and effect in accordance with its respective terms, (ii) upon consummation
of the transactions contemplated by this Agreement, each such contract and
agreement shall continue in full force and effect in accordance with its
respective terms without penalty, acceleration of payment or other adverse
consequence, (iii) none of the Acquired Companies is in breach of, or default
under, any such contract or agreement, and no event exists that, but for the
giving of notice or passage of time, would result in such a breach or default by
the Acquired Company party thereto, and (iv) to the Sellers' Knowledge, no other
party to any such contract or agreement is in breach thereof or default
thereunder, and no event exists that, but for the giving of notice or passage or
time, would result in such a breach or default by the other party thereto.
Certain other contracts and agreements concerning the Properties and the
Acquired Companies have been provided to the Buyer in the Review Room (as
hereinafter defined).
Section 2.13 Intellectual Property. Except as set forth on Schedule 2.13,
to Sellers' Knowledge, the Sellers own or have the right to use all trademarks,
trade names, service marks, trade secrets, copyrights and other intellectual
property rights (collectively, the "Intellectual Property Rights"), as are used
or necessary in connection with the business of the Acquired Companies taken as
a whole, except where the failure to own or have the right to use such
Intellectual Property Rights would not have a Material Adverse Effect. Except
as disclosed on Schedule 2.13 or as would not have, either individually or in
the aggregate, a Material Adverse Effect, to the Sellers' Knowledge, the rights
of any Acquired Company in or to the Intellectual Property Rights do not
conflict with or infringe on the rights of any other Person, and none of the
Sellers, nor the Acquired Companies has received any claim or written notice
from any Person, to such effect.
Section II.14 Environmental Matters. Except as disclosed on Schedule 2.14
and except for any matter which would not result in a Material Adverse Effect,
to Sellers' Knowledge, (a) the Acquired Companies are in compliance in all
material respects with all applicable Environmental Laws (as hereinafter
defined), (b) there are no material Environmental Liabilities and Costs (as
hereinafter defined) of the Acquired Companies, (c) there are no material
Environmental Conditions (as hereinafter defined) on or related to the
Properties, (d) none of the Acquired Companies has received any written notice
prior to the date of this Agreement from any governmental agency or other third
party alleging any violation of, or noncompliance with, any Environmental Law,
or requiring the removal, clean-up, or remediation of any Environmental
Condition, whether or not on any of the Properties relating to the Acquired
Companies, which such matter has not been resolved as of the date of this
Agreement, and (e) the Acquired Companies have not received written notice prior
to the date of this Agreement that they are subject to any enforcement or
investigatory action by any governmental agency regarding an Environmental
Condition with respect to any Property, which such matter has not been resolved
as of the date of this Agreement. As used herein, the terms "toxic" or
"hazardous" wastes, substances or materials shall include, without limitation,
all those so designated in and in any way regulated by any current Environmental
Laws. The Acquired Companies have previously made available to the Buyer copies
of all of the following written materials in their possession or control: copies
of any environmental audits, site assessments, documentation regarding off-site
disposal of hazardous materials, and material correspondence with any federal,
state or local government, administrative agency, or other Governmental
Authority, regarding the foregoing (the "Environmental Reports").
For purposes of this Agreement, the following definitions shall apply:
"Environmental Laws" means all applicable federal, state and local statutes or
laws, judgments, orders, regulations, licenses, permits, rules and ordinances
relating to pollution or protection of health, safety or the environment,
including, but not limited to the Federal Water Pollution Control Act (33 U.S.C.
1251 et seq.), Resources Conservation and Recovery Act (42 U.S.C. 6901 et.
seq.), Safe Drinking Water Act (42 U.S.C. 3000(f) et. seq.), Toxic Substances
Control Act (15 U.S.C. 2601 et seq.), Clean Air Act (42 U.S.C. 7401 et. seq.),
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
9601 et seq.), and other similar state and local statutes.
"Environmental Condition" means the introduction into the environment of any
contaminant, pollutant, hazardous or toxic waste, substance or material (whether
or not upon the Owned Properties or the Leased Properties) at levels or in
amounts in excess of applicable legal or regulatory permits, limits or
standards, as a result of which the Acquired Companies, with respect to this
Section 2.14, (1) have or may become liable to any Person or Governmental
Authority, (2) are in violation of any Environmental Law, or (3) by reason of
which any of the properties or other assets of the Acquired Companies, with
respect to this Section 2.14, may suffer or be subject to any lien.
"Environmental Liabilities and Costs" means all liabilities, obligations,
responsibilities, obligations to conduct cleanup, losses, damages, deficiencies,
punitive damages, costs and expenses (including, without limitation, all
reasonable fees, disbursements and expenses of counsel, expert and consulting
fees and costs of any necessary investigations and feasibility studies and
responding to government requests for information or documents), fines,
penalties, monetary sanctions, known or unknown, absolute or contingent, past,
present or future, resulting from any claim or demand, by any Person or
Governmental Authority, whether based in contract, tort, implied or express
warranty, strict liability, joint and several liability, criminal or civil
statute, under any Environmental Law, or arising from Environmental Conditions,
as a result of past or present ownership, leasing or operation of any
properties, owned, leased or operated by the Acquired Companies with respect to
Section 2.14.
Section 2.15 Compliance with Laws; Permits. Except as set forth on
Schedule 2.15, (i) none of the Acquired Companies (excluding for such purpose
all of their respective properties or assets) are in violation of any federal,
state, local or foreign judgement, order, decree, statute, law, ordinance, rule,
regulation, code and any judicial or administrative interpretation thereof, or
any other government or rule of law ("Law") or order of any Governmental
Authority ("Governmental Order") applicable to any of the Acquired Companies
except such violations as would not have a Material Adverse Effect and (ii) to
the Sellers' Knowledge, none of the Acquired Companies (including for such
purpose only all of their respective properties or assets) are in violation of
any Law or Governmental Order applicable to any such properties or assets,
except such violations as would not have a Material Adverse Effect. The
Acquired Companies have obtained all licenses, permits and other authorizations
and have taken all actions required by applicable law or governmental
regulations in connection with their business as now or as previously conducted
where the failure to obtain any such license, permit or authorization or to take
any such action, individually or in the aggregate, would have a Material Adverse
Effect.
Section 2.16 Insurance. Schedule 2.16 sets forth a true and correct
summary of the insurance policies held by, or for the benefit of, the Acquired
Companies including the underwriter of such policies and the amount of coverage
thereunder. To the Sellers' Knowledge, such insurance policies are valid and
currently in effect. The Sellers or the Acquired Companies have paid, or caused
to be paid, all premiums due under such policies and are not in default with
respect to any monetary obligations under such policies in any material respect.
Section 2.17 Brokers. No broker, investment banker, financial advisor or
other Person, other than Xxxxxxx Xxxxx & Co., the fees and expenses of which
will be paid by the Sellers, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement.
Section 2.18 Disclaimer; Knowledge; Disclosure; Material Adverse Effect.
(a) The Sellers do not make, and have not made, any representations or
warranties relating to the Sellers, the Acquired Companies, the Properties, or
the operations or businesses of the Sellers or the Acquired Companies, or the
businesses or operations conducted on, at or with respect to the Properties, or
otherwise in connection with the transactions contemplated hereby, other than
those expressly made by Sellers in this Agreement. Without limiting the
generality of the foregoing, except only as expressly set forth in those
representations and warranties made in Section 2.1 through 2.17 hereof (but
subject to the limitations set forth in Section 2.18(b) below), the Sellers have
not made, and shall not be deemed to have made, any representations or
warranties in any presentation of the businesses of the Acquired Companies
(including without limitation any management presentation or property or
facility tour) in connection with the transactions contemplated hereby, and no
statement made in any such presentation (including without limitation any
management presentation or property or facility tour) shall be deemed a
representation or warranty hereunder or otherwise. It is understood that any
cost estimates, projections or other predictions, any data, any financial
information, document, reports, sales brochure or other literature, maps or
sketches, financial information, or statements, or presentations (including
without limitation any management presentation or property or facility tour), or
any memoranda or offering materials including, without limitation, that certain
"Confidential Information Memorandum" dated November 1998 and any materials or
information contained therein and any amendments or supplements thereto (the
"Confidential Memorandum"), are not and shall not be deemed to be or to include
representations or warranties of the Sellers or the Acquired Companies, except
only as expressly set forth in those representations and warranties made in
Section 2.1 through 2.17 hereof (but subject to the limitations set forth in
Section 2.18(b) below), and the Buyer acknowledges that it has not relied and is
not relying on any such estimates, projections, predictions, data, financial
information, memoranda, offering materials or presentations (including without
limitation any management presentation or property or facility tour), including
without limitation, the Confidential Memorandum. No Person has been authorized
by the Sellers or the Acquired Companies to make any representation or warranty
relating to the Sellers, the Acquired Companies, the Properties, the businesses
of the Sellers or the Acquired Companies, or the businesses or operations
conducted on, at or with respect to the Properties, or otherwise in connection
with the transactions contemplated hereby and, if made, such representation or
warranty must not be relied upon as having been authorized by the Sellers or the
Acquired Companies.
(b) Prior to the Closing Date, the Buyer will have had the opportunity to
make all inspections and investigations, including a review of the materials
located in the due diligence review room (the "Review Room") at the offices of
Xxxxxxx, Procter & Xxxx LLP, concerning the Acquired Companies and the
Properties, which the Buyer deems necessary or desirable to protect its interest
in acquiring the Acquired Companies and their respective assets, including
without limitation, the Properties. The representations and warranties herein
are fully qualified by any matters disclosed in the items described or otherwise
listed in Schedule 2.18(b) hereto (but subject to the limitations contained in
such Schedule 2.18(b)) (the "Qualifying Materials"). By way of explanation and
not in supplementation of the preceding sentence, it is specifically
acknowledged and agreed by the parties hereto, as a material inducement to the
Sellers entering into this Agreement in the form hereof, without which agreement
Sellers would be unwilling to enter into this Agreement in the form hereof, that
any and all representations and warranties contained in this Agreement, the
accuracy of which could be confirmed or denied based upon any material present
in the Qualifying Materials, shall be null and void and deemed deleted from this
Agreement for all purposes. Except as otherwise expressly set forth in this
Agreement, neither the Sellers nor anyone acting for or on behalf of the Sellers
has made any representation, warranty, promise or statement (including without
limitation in the cover memorandum delivered with the form Stock Purchase
Agreement to each prospective buyer on or about December 23, 1998), express or
implied, to the Buyer on which the Buyer has relied concerning the Acquired
Companies and the Properties or the condition or use thereof. As a material
inducement to the execution and delivery of this Agreement by the Sellers, the
Buyer agrees that, except as otherwise expressly provided herein (but subject to
the limitations contained in this Section 2.18), at the Closing Date, the Buyer
will acquire the Properties in an "as-is" physical condition and in an "as-is"
state with all faults, subject only to the expressed representations and
warranties set forth in this Agreement. Notwithstanding anything herein to the
contrary, the Buyer waives and the Sellers disclaim all implied warranties of
any type or kind with respect to the Properties.
(c) Whenever a representation or warranty made by the Sellers herein refers
to the knowledge of the Sellers, or to the "Sellers' Knowledge," it shall be
deemed to refer only to the actual knowledge (and not constructive, imputed or
implied knowledge) on the date hereof and on the Closing Date, as applicable, of
Xxxxx X. Husband, Xxxxxx X. Xxxxxxxx, Xxxxxx Xxxxxxx, Xxxx X. Xxx, Xxxxx
Xxxxxxxx, Xxxxxxx X. Xxxxx, Xxxxx Xxxx, Xxxx X. Xxxxxxxxxx, Xxxx Xxxxxxxxxx,
Xxxxx X. Xxxxx, Xxx Xxxxxxxx, Xxx Xxxxxx, Tighue Xxxxxxx, Xxx Dznowski, Jr.,
Xxxx Xxxxx, Xxxx Xxxxxx, Xxxx Xxxxxxxx, Xxxxx Xxxxx, Xxxxx X. Xxxxxx, Xxxxxxx X.
Xxxxxxxx and Xxxxxx X. Xxxxxx, none of whom shall have any personal liability or
obligations regarding such knowledge. The Sellers have not undertaken, nor
shall they have any duty to undertake, any investigation concerning any matter
as to which a representation or warranty is made as to its "Knowledge."
(d) Notwithstanding anything to the contrary contained in this Agreement or
in any of the schedules attached hereto, any information disclosed in one
schedule shall be deemed to be disclosed in all schedules provided that the
information so disclosed is disclosed with the requisite degree of specificity
in order to qualify, or disclose for the purposes of, such other schedule.
Certain information set forth in the schedules is included solely for
informational purposes and may not be required to be disclosed pursuant to this
Agreement. The disclosure of any information shall not be deemed to constitute
an acknowledgment that such information is required to be disclosed in
connection with the representations and warranties made by the Sellers in this
Agreement or that it is material, nor shall such information be deemed to
establish a standard of materiality. The Sellers have prepared the schedules to
this Agreement in good faith and without regard to any applicable "Material
Adverse Effect" or other "materiality" qualifier, provided, however, that
notwithstanding such standard of preparation, nothing contained herein shall
limit or otherwise qualify the standard of the representations and warranties
contained in Sections 2.1 through 2.17 hereof for the purposes of determining
the existence of a breach of any such representation or warranty.
(e) "Material Adverse Effect" means any change in, or effect on, the
Acquired Companies, taken as a whole, that is (individually or in the aggregate
with any other changes therein or effects thereon that would be specifically
addressed by a representation or warranty contained in this Agreement but for a
"Material Adverse Effect" exception or qualification) materially adverse to the
business, operations, assets, liabilities, financial condition or results of
operations or prospective business and earnings (assuming such prospective
business is conducted in a manner consistent with prior business operations) of
the Acquired Companies, taken as a whole, other than any such changes or effects
resulting from any of the following, the change in or effect of which shall not
constitute or result in (i) a Material Adverse Effect or (ii) a breach of a
representation or warranty under this Article II: (A) changes in general
(national, regional or local) economic, regulatory or political conditions or
changes in the golf course industry generally, or (B) this Agreement, the
transactions contemplated hereby, or any announcement or indication thereof, or
any actions taken by the Buyer hereunder or in contemplation hereof, or any
actions which a Seller was required to take, hereunder, or any direct contact of
the Buyer or any of its representatives with any of the customers or suppliers,
or potential customers or suppliers, or any of the employees of, the Acquired
Companies (including any departure of any such employee).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
Section 3.1 Organization of the Buyer; Authority.
(a) The Buyer is a duly formed, validly existing and in good standing under
the laws of the State of Delaware and has all the requisite corporate power and
authority to enter into this Agreement, to carry out its obligations hereunder
and to consummate the transactions contemplated hereby. The Buyer is qualified
to do business in each jurisdiction in which the nature of its business requires
it to be so qualified except to the extent the failure to so qualify would not,
either individually or in the aggregate, have a material adverse effect on the
ability of the Buyer to perform its obligations under this Agreement.
(b) The execution and delivery of this Agreement, the performance by the
Buyer of its obligations hereunder and the consummation of the transactions
contemplated hereby have been duly authorized by all requisite corporate action
on the part of the Buyer. This Agreement has been duly executed and delivered
by the Buyer and assuming the due authorization, execution and delivery of this
Agreement by the Sellers, this Agreement constitutes a legal, valid and binding
obligation of the Buyer, enforceable against the Buyer in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
or by general equitable principles.
Section 3.2 No Conflict. Except as provided in Schedule 3.2, and
except as may result from any facts or circumstances related solely to the
Sellers, and assuming that all consents, approvals, authorizations and other
actions described in Section 3.3 have been obtained and all filings and
notifications listed in Schedule 3.3(a) have been made, neither the Buyer nor
any of its subsidiaries is subject to or bound:
(a) to Buyer's Knowledge (as hereinafter defined), by any provision of any
law, statute, rule, regulation or judicial or administrative decision,
(b) by the provisions of any articles or certificate of incorporation or
by-laws, (or similar organizational, constitutive or governing document) of the
Buyer,
(c) to Buyer's Knowledge, by any provision of any mortgage, deed of trust,
lease, note, shareholders' agreement, partnership agreement, bond, indenture,
license, permit, trust, contract, agreement, sublease, franchise or other
instrument or arrangement to which the Buyer is a party as it relates to the
business of the Buyer or by which any of such assets or properties are bound or
affected, or
(d) by any provision of any judgment, order, writ, injunction or decree of
any court, governmental body, administrative agency or arbitrator, that would
prevent, violate or conflict with or under which there would be a default as a
result of the execution, delivery or performance of this Agreement, nor, is the
consent of any person or entity under any material contract or agreement or
under federal or state law, which has not been obtained prior to the Closing,
required for the execution, delivery, and performance by the Buyer of this
Agreement and the transactions contemplated thereby, except for violations,
defaults, conflicts or failures to obtain consents or to make filings or provide
notices which would not have a material adverse effect on the Buyer or a
material adverse effect on the ability of the Buyer to perform its obligations
under this Agreement.
Section 3.3 Consents and Approvals.
(a) To the Buyer's Knowledge, except as set forth on Schedule 3.3(a), the
execution, delivery and performance of this Agreement by the Buyer will not, as
of the Closing Date, require any consent, approval, authorization or other
action by, or filing with or notification to, any Governmental Authority, except
(i) the notification requirements of the HSR Act, if applicable, (ii) where
failure to obtain such consent, approval, authorization or action, or to make
such filing or notification, would not have a material adverse effect on the
ability of the Buyer to perform its obligations under this Agreement, and (iii)
as may be necessary as a result of any facts or circumstances relating solely to
the Sellers.
(b) Except as set forth on Schedule 3.3(b), the execution, delivery and
performance of this Agreement by the Buyer will not, as of the Closing Date,
require any third-party consents, approvals, authorizations or actions, except
where failure to obtain such consents, approvals, authorizations or actions
would not have a material adverse effect on the ability of the Buyer to perform
its obligations under this Agreement.
Section 3.4 Litigation. There is no action, suit or proceeding, claim,
arbitration or investigation against the Buyer or, to the Buyer's Knowledge,
threatened, which, if adversely determined, (a) would delay or prevent the
consummation of the transactions contemplated by this Agreement, or (b) would
have a material adverse effect on the ability of the Buyer to perform its
obligations under this Agreement. To the Buyer's Knowledge, the Buyer is not
subject to any Governmental Order (nor, to the Buyer's Knowledge, are there any
such Governmental Orders threatened to be imposed by any Governmental Authority)
which (x) would delay or prevent the consummation of the transactions
contemplated by this Agreement, or (y) would have any material adverse effect on
the ability of the Buyer to perform its obligations under this Agreement.
Section 3.5 Financing. The Buyer has, or has available to it, all funds
necessary to consummate the transactions contemplated by this Agreement.
Section 3.6 Brokers. No broker, investment banker, financial advisor or
other Person, other than NationsBanc Xxxxxxxxxx Securities, the fees and
expenses of which will be paid by the Buyer, is entitled to any broker's,
finder's, financial advisor's or other similar fee, commission or expense in
connection with the transactions contemplated by this Agreement.
Section 3.7 Investment Intent. The Buyer is acquiring the Acquired Shares
solely for the purpose of investment and not with a view to, or for offer or
sale in connection with, any distribution thereof.
Section 3.8 Buyer's Knowledge. Whenever a representation or warranty made
by Buyer herein refers to the knowledge of Buyer, or to the "Buyer's Knowledge"
it shall be deemed to refer only to the actual knowledge (and not constructive,
imputed or implied knowledge) on the date hereof and on the Closing Date, as
applicable, of Xxxxxx X. Xxxxxx, Xx., and Xxxxx X. Xxxxxx, none of whom shall
have any personal liability or obligations regarding such knowledge. The Buyer
has not undertaken, nor shall it have any duty to undertake, any investigation
concerning any matters as to which a representation or warranty is made as to
its "Knowledge."
ARTICLE IV
CERTAIN COVENANTS AND AGREEMENTS OF THE BUYER AND SELLER
Section 4.1 Conduct of Business Prior to Closing.
(a) The Sellers covenant and agree that, between the date hereof and the
Closing Date, they shall cause the Acquired Companies to operate in the ordinary
course of business, consistent with past practice, except as otherwise provided
in this Agreement and except: (i) as otherwise contemplated by this Agreement;
(ii) except as permitted by Section 4.1(b), that the Acquired Companies may not
distribute cash and cash equivalents to one or more of the Sellers on or prior
to the Closing Date; and (iii) that the rights (if any) of REITCO in and to, and
the obligations under or arising from, (x) the tradename "Cobblestone" and (y)
that certain license agreement by and among REITCO, as successor by merger to
Cobblestone Holdings, Inc., MGG and Cobblestone, pursuant to which REITCO and
MGG currently license certain rights in and to the tradename "Cobblestone" will
be assigned by REITCO to MGG prior to the Closing and (iv) that the Sellers or
their Affiliates (including the Acquired Companies) may transfer shares of
capital stock of the Acquired Companies so long as (A) the Sellers transfer to
the Buyer pursuant to Article I hereof, all of the issued and outstanding
Acquired Shares, and (B) the Companies own all of the issued and outstanding
capital stock of their Subsidiaries, except as disclosed on the Schedules
hereto.
Without limiting the generality of the foregoing, from the date hereof until the
Closing, except as required by this Agreement and except for transactions
expressly approved in writing by Buyer, which approval shall not be unreasonably
withheld, Sellers shall use commercially reasonable efforts to:
(A) Maintain inventories and pre-paid expenses at current levels, except for
purchases and/or sales in the ordinary course of business, and maintain the
properties and assets of the Acquired Companies in good repair, order and
condition, reasonable wear and tear and involuntary casualty and condemnation
excepted;
(B) Maintain and keep in full force and effect (I) all insurance on the
Acquired Companies' assets and property, (II) the insurance for the benefit of
employees of the Acquired Companies, (III) all liability and other casualty
insurance, and (IV) all bonds on personnel, which, in each case, are currently
in effect, or commercially reasonable substitutions therefor;
(C) Maintain and operate the Acquired Companies and the properties and
assets of the Acquired Companies in compliance in all material respects with all
applicable Laws, including, without limitation and subject to the rights set
forth in Section 4.12 hereunder, all applicable Environmental Laws;
(D) Manage and administer all pending and threatened litigation matters in a
manner consistent with commercially reasonable business practice, giving due
regard to recommendations of legal counsel;
(E) Maintain all liquor (or beer and wine, as applicable) licenses, permits
and authorizations required by Law for the continued sale of alcohol by the
Acquired Companies at those Properties at which alcohol is presently served;
(F) Maintain all current insurance or reinsurance policies the absence of
which would have a Material Adverse Effect, unless simultaneously with any
cancellation, termination, or lapse, replacement policies providing coverage
equal to or greater than the coverage so canceled, terminated, or lapsed are in
full force and effect and written copies thereof have been provided to Buyer;
and
(G) Continue all capital projects, including without limitation, the
construction and development of the Blackstone Golf Club in Frisco, Texas and
the Whitestone Golf Club in Benbro, Texas as set forth in the capital
expenditure budget attached as Schedule 4.1(c).
(b) The Sellers and the Buyer agree that all intercompany accounts (if any)
between the Sellers or any affiliate of the Sellers (other than an Acquired
Company) on the one hand and any of the Acquired Companies on the other hand
shall be settled by the Sellers and the Acquired Companies, at or prior to the
Closing.
(c) In furtherance and not in limitation of the foregoing, the Sellers
covenant and agree that, except as described in Schedule 4.1(c), the Acquired
Companies will not, prior to the Closing, without the consent of the Buyer,
which consent shall not be unreasonably withheld (except as set forth in
subsections (iv) and (vii) below):
(i) Make any purchase, sale or disposition of any asset or property with a
purchase price in excess of $75,000 individually or $100,000 in the aggregate,
except as provided in the Acquired Companies existing capital budget, or
mortgage, pledge, subject to a voluntary lien or otherwise voluntarily encumber
(except for mechanics', carriers', suppliers' workmen's or repairmen's liens)
any of its properties or assets, except for any such mortgage, pledge, lien or
encumbrance which, by its terms, will be terminated or otherwise be extinguished
at or prior to the Closing;
(ii) Incur any material contingent liability as a guarantor or otherwise
with respect to the obligations of others, or incur any other material
contingent or fixed obligations or liabilities in excess of $75,000 individually
or $100,000 in the aggregate;
(iii) Make any change or incur any obligation to make a change in its
articles or certificate of incorporation, by-laws or authorized or issued
capital stock, except for the release of any pledge of the Acquired Shares made
by or on behalf of the Sellers to REITCO's senior lenders;
(iv) Declare, set aside or pay any dividend, make any other distribution in
respect of its capital stock or make any direct or indirect redemption, purchase
or other acquisition of its capital stock, except for any transfer of the
Acquired Shares by and between the Sellers and/or their respective Subsidiaries
on or prior to the Closing Date and provided, however, that, from and after
March 31, 1999 (provided that Sellers shall have extended the Closing Date in
accordance with Section 1.4 hereof) in no event shall the Acquired Companies pay
any dividend, make any distribution in respect of its capital stock, issue any
capital stock or make any direct or indirect redemption, purchase or other
acquisition of its capital stock, make payments to any Affiliates (other than
any other Acquired Company and its Subsidiaries) except only for payments
permitted under Sections 4.1(b) and 4.1(c)(vi) hereof except (x) for any
transfer of the Acquired Shares by and between the Sellers and/or their
respective Subsidiaries on or prior to the Closing Date, as extended, and (y)
the Acquired Companies shall be entitled to distribute or otherwise pay to the
Sellers amounts contributed, loaned or otherwise paid by Sellers after March 31,
1999 in connection with capital projects;
(v) Make any change in the compensation payable or to become payable (A) to
any of the officers, employees, agents or independent contractors who receive
total annual compensation of $50,000 or less other than in the ordinary course
of business consistent with past practice; or (B) to any of its officers,
employees, agents or independent contractors who receive total annual
compensation in excess of $50,000;
(vi) Prepay any loans (if any) from its shareholders, officers or directors,
other than as required by their respective terms and as required by Section
4.1(b) hereof, or make any change in its borrowing arrangements;
(vii) Amend, modify or terminate any contract or agreement disclosed
pursuant to Section 2.12(a) hereof or execute or otherwise enter into or amend
or modify any contract or agreement with the Sellers or their Affiliates (except
for the Acquired Companies) except as otherwise contemplated by this Agreement;
(viii) Change any material accounting principles, policies or practices used
by its relating to the Acquired Companies, except for (A) the write-off (if any)
of goodwill, and (B) any change required by reason of a concurrent change in
generally accepted accounting principals and notice of which is given in writing
by Sellers to Buyer;
(ix) Amend the membership by-laws for any club (each a "Club", and
collectively, the "Clubs") owned or operated by any of the Acquired Companies;
(x) Sell, assign or create any life or equivalent membership in any Club;
(xi) Sell, create or assign memberships (a) which include a change of more
than 10% in the pricing of any goods or services, including but not limited to
initiation fees, joining fees, dues, greens fees, cart fees, food, beverage or
merchandise, either individually or in the aggregate, or (b) in excess of 110%
of the pro rated monthly revenue budget for memberships and initiation fees;
(xii) sell more than five memberships to any one party;
(xiii) Create or issue any honorary membership at any Club;
(xiv) Collect any monthly or quarterly dues (in excess of de minimis
amounts) more than 1 collection period in advance;
(xv) Merge or consolidate with or agree to merge or consolidate with, nor
purchase or agree to purchase all or substantially all of the assets of, or
otherwise acquire, any other party (subject to the terms of Section 4.8 hereof);
(xvi) Authorize for issuance, issue, sell or deliver any additional stock of
any class of any Acquired Company or any securities or obligations convertible
into stock of any class of any Acquired Company or issue or grant any option,
warrant or other right to purchase any stock of any class of any Acquired
Company;
(xvii) Except for the transfer of capital stock of MGG II from OPCO to
REITCO, assign, transfer, convey, pledge or transfer any shares of any Acquired
Company's capital stock;
(xviii) Modify, amend or alter any existing credit facilities, the
obligations with respect to which will remain with the Acquired Company after
the Closing Date;
(xix) Cause a default by an Acquired Company under any existing material
agreement or contract of such Acquired Company, which default, if not willful,
could have a Material Adverse Effect;
(xx) Execute or otherwise enter into any construction or development
agreement requiring a payment in excess of $100,000 except as otherwise provided
in the Acquired Companies' capital budget attached as Schedule 4.1(c) hereto;
(xxi) Cause or suffer any act or omission from and after the date of this
Agreement which would cause or result in the breach of the representations and
warranties contained in Section 2.14, which breach would have a Material Adverse
Effect; provided, however, that the disclosure of items by the Buyer pursuant to
Section 4.12 hereof shall not be deemed to be an act or omission resulting in a
breach of the representations and warranties contained in Section 2.14;
(xxii) Take any affirmative action, or affirmatively fail to take any
action, necessary to maintain all permits, licenses and authorizations (except
as they relate to alcohol) required by Law for the operation of the Acquired
Companies and the Properties the absence of which would have a Material Adverse
Effect; and
(xxiii) Agree or make any commitment to take any of the actions prohibited
by this Section 4.1.
Section 4.2 Investigation. The Buyer acknowledges and agrees that it (a)
has made its own inquiry and investigation into, and, based thereon, has formed
an independent judgment concerning, the Acquired Companies, and (b) will not
assert any claim against the Sellers or the Acquired Companies or any of their
respective directors, officers, employees, agents, shareholders, Affiliates,
consultants, investment bankers, advisors or representatives, or hold the
Sellers or any such Persons liable, for any inaccuracies, misstatements or
omissions with respect to such information furnished by the Sellers or such
Persons concerning the Acquired Companies, other than any inaccuracies or
misstatements in the representations and warranties contained in this Agreement
or as otherwise expressly provided herein (subject to the limitations set forth
in Section 2.18) or in the case of fraud. Sellers acknowledge and agree that
Buyer will make its own investigations and inquiries with respect to the
Acquired Companies and Properties; provided that information obtained through
such investigations that is not included in the Review Room will not limit,
qualify or in any manner affect Sellers' representations or warranties contained
in this Agreement or limit Buyer's rights to assert claims based upon such
representations or warranties.
Section 4.3 Access to Information.
(a) From the date hereof until the Closing Date, upon reasonable notice, the
Sellers shall, and shall cause each Acquired Company and each of their
respective officers, directors, employees, representatives, attorneys, auditors
and authorized agents to, (i) afford the officers, directors, employees,
authorized agents, auditors, attorneys and representatives of the Buyer
reasonable access, during normal business hours, to the offices, properties,
other facilities, books and records of the Acquired Companies and to those
officers, directors, employees, representatives, counsel, auditors and agents of
the Acquired Companies who have material knowledge pertaining to the Properties
or the Acquired Companies including, without limitation, access to enter upon
and investigate the Properties or the Acquired Companies, and (ii) furnish to
the officers, directors, employees and authorized agents, auditors, attorneys
and representatives of the Buyer such additional financial and operating data
and other information regarding the Acquired Companies as the Buyer may from
time to time reasonably request; provided, however, that (A) such investigation
shall not unreasonably interfere with any of the businesses or operations of the
Acquired Companies, (B) the Buyer shall not, prior to the Closing Date, have any
contact whatsoever with respect to the Acquired Companies or with respect to the
transactions contemplated by this Agreement with any partner, lender, ground
lessor, vendor or supplier of the Acquired Companies, except in consultation
with the Sellers and then only with the express prior approval of the Sellers,
which approval shall not be unreasonably withheld or delayed, and (C) all
requests by the Buyer for access or information pursuant to this Section 4.3(a)
shall be submitted or directed exclusively to an individual or individuals to be
designated by the Sellers. The Buyer shall not be permitted to conduct any
invasive tests on any Property without the Sellers' and the applicable Acquired
Company's prior written consent, which consent shall not be unreasonably
withheld or delayed. The Buyer agrees to indemnify the Sellers from and against
any and all Losses (as hereinafter defined) suffered by the Sellers as a result
of any actions taken by the Buyer with respect to the investigations and
inspections contemplated hereby (excluding any Losses associated with any
pre-existing Environmental Conditions discovered or identified as a result of
the exercise of Buyer's rights under Section 4.12 below).
(b) During the preparation, review and dispute resolution time periods
contemplated by Section 1.3, upon reasonable notice, the Buyer shall, and shall
cause each Acquired Company (or any successor thereto) and each of their
respective officers, directors, employees, representatives, attorneys, auditors
and authorized agents to, (i) afford the officers, directors, employees,
auditors, attorneys, authorized agents and representatives of the Sellers
reasonable access, during normal business hours, to the offices, properties,
books and records of the Acquired Companies (or any successor or successors
thereto), (ii) furnish to the officers, directors, employees, auditors,
attorneys, authorized agents and representatives of the Sellers such additional
financial and operating data and other information regarding the Acquired
Companies (or any successor or successors thereto) as the Sellers may from time
to time reasonably request to perform its obligations, or avail itself of its
rights, contained, in each case, in Section 1.3 hereof; provided, however, that
such investigation shall not unreasonably interfere with any of the businesses
or operations of the Acquired Companies (or any successor or successors
thereto).
(c) In order to facilitate the resolution of any claims made by or against
or incurred by the Buyer of the Acquired Companies after the Closing or for any
other reasonable purpose, for a period of seven (7) years following the Closing,
the Sellers shall (i) retain the books and records of the Sellers which relate
to the Acquired Companies and their operations for periods prior to the Closing
and which shall not otherwise have been delivered to the Buyer or the Acquired
Companies and (ii) upon reasonable notice, afford the officers, directors,
employees, authorized agents, auditors, attorneys and representatives of the
Buyer and Acquired Companies reasonable access (including the right to make
photocopies, at the expense of the Buyer or the Acquired Companies), during
normal business hours, following reasonable notice thereof, to such books and
records.
(d) In order to facilitate the resolution of any claims made by or against
or incurred by the Sellers after the Closing in respect of their ownership of
the Acquired Companies or for any other reasonable purpose, for a period of
seven (7) years following the Closing, the Buyer shall, and shall cause the
Acquired Companies to, (i) retain the books and records of the Buyer or the
Acquired Companies, as the case may be, and their operations for periods prior
to the Closing and which shall not otherwise have been retained by the Sellers
and (ii) upon reasonable notice, afford the officers, directors, employees,
authorized agents, auditors, attorneys and representatives of the Sellers
reasonable access (including the right to make photocopies, at the expense of
the Sellers), during normal business hours, following reasonable notice thereof,
to such books and records.
Section 4.4 Confidentiality. Subject to the requirements of applicable Law
until the Closing, the parties will, and will instruct each of their respective
Affiliates, associates, partners, employees, directors, officers, agents,
attorneys, auditors, investment bankers, representatives and advisors (the
"Representatives") to, hold in confidence all such information as is
confidential or proprietary, will use such information only in connection with
the consummation of the transactions contemplated by this Agreement and, if this
Agreement is terminated in accordance with its terms, will deliver promptly to
the others (or destroy and certify to the other the destruction of) all copies
of such information (and any copies, compilations or extracts thereof or based
thereon) then in their possession or under their control. Each party hereto
agrees that money damages would not be a sufficient remedy for any breach of
this Section 4.4 by the other party hereto or any of its Representatives, and
that, in addition to all other remedies, such non-breaching party shall be
entitled to specific performance and injunctive or other equitable relief as a
remedy for any such breach, and each such party further agrees to waive and to
use its best efforts to cause its Representatives to waive, any requirement for
the securing or posting of any bond in connection with any such remedy. Each
party agrees to be responsible for any breach of this Section 4.4 by any of its
Representatives. Nothing contained in this Section 4.4 shall effect, modify or
otherwise limit the respective agreements and other obligations of Club
Corporation of America (now known as ClubCorp USA, Inc.), on the one hand, and
Sellers, on the other, contained in that certain Confidentiality Agreement dated
as of November 15, 1998, (the "Confidentiality Agreement"), which
Confidentiality Agreement shall remain in full force and effect.
Section 4.5 Regulatory and Other Authorizations; Consents.
(a) The Sellers shall use their good faith commercially reasonable efforts
to obtain (or cause the Acquired Companies to obtain) the authorizations,
consents, orders and approvals that are or become necessary for their execution
and delivery of, and the performance of their obligations pursuant to, this
Agreement, including, without limitation, the consent of (i) Governmental
Authorities, (ii) landlords under the ground leases, and (iii) lenders, and the
Buyer shall cooperate fully with the Sellers in promptly seeking to obtain all
such authorizations, consents, orders and approvals. If required by the HSR
Act, each party hereto agrees to make an appropriate filing of a Notification
and Report Form pursuant to the HSR Act with respect to the transactions
contemplated by this Agreement (the "Notification Form") within ten (10)
business days after the date hereof and to supply promptly any additional
information and documentary material that may be requested pursuant to the HSR
Act. The parties hereto will not take any action that will have the effect of
delaying, impairing or impeding the receipt of any required approvals.
(b) The Sellers shall give promptly, or shall cause the Acquired Companies
to give promptly, such notices to third parties and use its or their
commercially reasonable efforts (without, however, any obligation to incur any
costs, liability or other obligation, in excess of de minimis amounts, except
that the Sellers shall pay any consent or other transfer fee or similar payment
required to be paid to the lessor in connection with the granting of a Required
Consent (as defined in Section 7.3(b) hereof)) under any ground lease identified
on Schedule 4.13, to obtain such third party consents as the Buyer may in its
sole and absolute discretion deem necessary or desirable in connection with the
transactions contemplated by this Agreement; provided, however, that the forms
of such notice and/or consent shall be reasonably acceptable to Sellers and
Buyer; and provided, further, however, that any failure to obtain such third
party consents shall not constitute a breach of this Agreement or a failure of
any condition to Closing nor shall it give rise to any right of termination on
the part of the Buyer or impose any independent obligation or liability on the
Sellers except as otherwise set forth in this Agreement.
(c) The Buyer shall use its good faith commercially reasonable efforts to
assist the Sellers in obtaining the consents of third parties listed in Schedule
2.6(b), including (i) providing to such third parties such financial statements
and other financial information as such third parties may reasonably request,
(ii) agreeing to commercially reasonable adjustments to the terms of the
agreements with such third parties (provided that neither party hereto shall be
required to agree to any increase in the amount payable with respect thereto so
long as there shall be no increase in Buyer's obligations or decrease in its
rights other than to a de minimis extent) and (iii) executing agreements to
effect the assumption of such agreements on or before the Closing Date effective
from and after the Closing Date.
(d) The Buyer assumes as of the Closing Date, and will continue to honor in
accordance with the respective provision, any and all obligations of the Sellers
arising from and after such date relating to and arising from Section 6.9(a) (to
the extent the Buyer is acquiring any entity covered thereby or a successor
thereto) of that certain Agreement and Plan of Merger dated as of January 11,
1998 among REITCO, OPCO and Cobblestone Holdings, Inc., as amended. The Buyer
agrees to indemnify the Sellers for any and all Losses incurred by the Sellers
arising out of the breach of any such obligations.
Section 4.6 Further Action. Each of the parties hereto shall use its
respective best efforts to take or cause to be taken all appropriate action, do
or cause to be done all things necessary, proper or advisable, and execute and
deliver such documents and other papers, as may be required to carry out the
provisions of this Agreement and consummate and make effective the transactions
contemplated by this Agreement.
Section 4.7 Press Releases. The parties hereto will, and will cause each
of their Affiliates to, maintain this Agreement confidential and will not, and
will cause each of their Affiliates not to, issue or cause the publication of
any press release or other public announcement with respect to this Agreement or
the transactions contemplated hereby without the prior written consent of the
other party hereto which consent shall not be unreasonably withheld; provided,
however, that nothing herein will prohibit the Sellers or the Buyer from issuing
or causing publication of any such press release or public announcement to the
extent that such party reasonably determines, after consultation with outside
legal counsel, such action to be required by Law or the rules of any applicable
self-regulatory organization, in which event such party will use its
commercially reasonable efforts to allow the other party reasonable time to
comment on such release or announcement in advance of its issuance. The parties
acknowledge that a press release in the form of Schedule 4.7 shall be made
immediately following the execution of this Agreement.
Section 4.8 No Solicitation.
(a) Except as otherwise provided herein, unless and until this Agreement
shall have been terminated in accordance with its terms, the Sellers agree and
covenant that (i) neither Seller nor any of their respective subsidiaries shall,
and each of them shall direct and use their best efforts to cause their
respective officers, directors, employees, agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it or any of its subsidiaries) not to, directly or indirectly,
initiate, solicit or encourage any inquiries or the making or implementation of
any proposal or offer with respect to a merger, acquisition, or similar
transaction involving the purchase of the Acquired Companies or the Acquired
Shares (any such proposal or offer being hereinafter referred to as an
"Acquisition Proposal") or engage in any negotiations with, or provide any
confidential information or data to, or have any discussions with, any person
relating to, an Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal.
(b) Notwithstanding anything set forth in this Agreement to the contrary,
the Boards of Directors of the Sellers may furnish information to or enter into
discussions or negotiations with any person that makes an unsolicited bona fide
proposal to purchase the Acquired Companies, whether by merger, purchase of
capital stock or all or substantially all of their assets or otherwise (a
"Proposal"), if the Boards of Directors of the Sellers determine in good faith
that the Proposal, if consummated as proposed, would result in a transaction
more favorable to the Sellers' stockholders from a financial point of view than
the transactions contemplated by this Agreement (any such Proposal being
referred to herein as a "Superior Proposal").
Section 4.9 Tax Cooperation; Structuring Matters.
(a) After the Closing, Sellers shall, and shall cause their Affiliates to,
cooperate fully with Buyer in the preparation of all Tax Returns (other than Tax
Returns with respect to the period of ownership of an Acquired Company by REITCO
as a qualified REIT subsidiary, which shall be prepared and filed or caused to
be filed in a manner consistent with past practice and in the ordinary course of
business (subject to any departure required to comply with any applicable law)
relating to periods ending on or prior to the Closing Date and shall provide to
Buyer, or cause to be provided, at Sellers' sole cost and expense, any records
and other information reasonably requested by such parties in connection
therewith as well as access to, and the cooperation of, the auditors of Sellers
and their Affiliates. After the Closing, Sellers shall, and shall cause their
Affiliates to, cooperate fully with Buyer in connection with any tax
investigation, audit or other proceeding relating to the Acquired Companies.
After the Closing, Buyer shall, and shall cause its Affiliates to, cooperate
fully with Sellers in the preparation of all tax returns required to be filed by
Sellers relating to the golf business and to periods ending on or prior to the
Closing Date and shall provide to Sellers, or cause to be provided at Buyer's
sole cost and expense, any records and other information requested by such
parties in connection therewith as well as access to, and the cooperation of,
Buyer's auditors. Any information obtained pursuant to this Section 4.9 or
pursuant to any other Section hereof providing for the sharing of information or
the review of any tax return or other Schedule relating to taxes shall be
subject to Section 4.4 hereof.
(b) If and to the extent so requested by the Sellers, and subject to the
Buyer's reasonable judgment that all other conditions precedent of the Sellers
to the Closing have been, or will be, satisfied or waived, the Sellers may
revise the method of effecting Buyer's acquisition of MGG, MGG II and/or
Cobblestone, including without limitation an acquisition of all of the assets of
such entity or entities; provided, however, that (i) any breach of this
Agreement by Buyer and any inability of the Buyer to satisfy any condition to
the Closing arising, in each case, solely as a result of such revised method of
effecting such acquisition shall not be deemed a breach or a failure of such
condition to the Closing, and (ii) the Buyer receives substantially the same
economic benefit as a result of such revised transaction as it would have
received as a result of acquiring the Acquired Shares. Notwithstanding the
foregoing, the Sellers shall have the right, in their sole discretion, to
convert MGG, MGG II and/or Cobblestone into a limited liability company which is
treated as a "disregarded" entity for Federal income tax purposes, or to
transfer the "Cobblestone" trade name and any similar intangibles held by MGG to
a corporation all of the capital stock of which would be owned by MGG and/or
Cobblestone. The parties hereto agree that they will execute, and will cause
their respective direct and indirect subsidiaries to execute, such agreements
and documents and such amendments to this Agreement and any related documents as
shall be appropriate in order to reflect such revised structure.
Section 4.10 Repair of Damage; Condemnation.
(a) In the event that prior to the Closing there is any damage to the
Properties, or any part thereof, which has not been restored prior to Closing to
substantially similar condition as immediately prior to the date such damage
occurred, Buyer shall accept such Properties in their then-current condition,
and Sellers shall remit to the Buyer the net amount of insurance proceeds
actually received by Sellers with respect to such damage, and Buyer and Sellers
shall proceed with the Closing.
(b) In the event that prior to the Closing, any portion of the Properties is
subject to a taking, Buyer shall accept the Properties in their then-current
condition and proceed with the Closing, in which case Sellers shall remit the
net amount of any award actually received by Sellers in connection with such
taking. In the event of any such taking that will have a Material Adverse
Effect, Sellers shall not compromise, settle, or adjust any claims to such award
without Buyer's prior written consent, which consent shall not be unreasonably
withheld or delayed.
(c) Sellers agree to give Buyer prompt notice of any taking of, or damage
to, any material part of the Properties.
Section 4.11 Liquor Licenses.
(a) The parties hereto agree to use commercially reasonable efforts to
preserve or to otherwise obtain those authorizations, consents or approvals
necessary to assure that each Property currently operating with a liquor (beer)
license, or that is in the process of applying for such license, either retains
such liquor (beer) license immediately prior to the Closing or receives a new
liquor (beer) license no later than the Closing Date provided, however, that in
the event the Sellers use their commercially reasonable efforts as provided
herein, neither Sellers nor any of their Affiliates or subsidiaries shall have
any liability or obligation to Buyer or any person claiming through Buyer in the
event that any or all such liquor (beer) licenses, authorizations, consents or
approvals are not retained or received, as applicable.
(b) The Sellers and the Buyer agree that, in the event any consent, approval
or authorization necessary or desirable to preserve or otherwise obtain a liquor
(beer) license for any Property is not obtained prior to the Closing, the
Sellers will, subsequent to the Closing, cooperate with the Buyer and the
Acquired Companies (at Buyer's sole cost and expense) in attempting to obtain
such consent, approval or authorization as promptly thereafter as practicable.
Until such consent, approval or authorization can be obtained, but (I) with
respect to those liquor (beer) licenses which have been issued and are in place
immediately prior to Closing only and (II) for a period not to exceed six (6)
months after Closing, the Sellers, will enter into such customary arrangements
(including, without limitation, reasonable compensation to the Sellers (but
without a profit component), the assumption of all loss, cost, obligation and
liability of any kind or nature, the full indemnification of Sellers in
connection therewith and the maintenance of all applicable insurance by Buyer)
as the Buyer may reasonably request and the Sellers' shall reasonably agree to,
subject in all events to applicable Law and at Buyer's sole cost and expense, to
provide the Buyer or the Acquired Companies with the rights and benefits of the
existing liquor (beer) license for such period. Notwithstanding the forgoing,
Buyer and Sellers acknowledge and agree that (i) certain of the liquor (beer)
licenses may not be under the direct control of the Sellers, and as a result,
provided that Sellers undertake, in a commercially reasonable manner, to require
that the holder(s) of the liquor (beer) license enters into the arrangement
contemplated in the preceding sentence, Sellers' obligations set forth therein
shall be deemed satisfied, (ii) certain governmental and quasi-governmental
agencies and authorities (including without limitation, applicable alcohol
beverage commissions and comparable entities) may prohibit or materially
restrict the use by Buyer of the rights and benefits of the existing liquor
(beer) licenses, in which event (provided that Sellers cooperate in good faith
with the Buyer in order to structure a customary arrangement which will provide
the Buyer with the rights and benefits of the existing liquor (beer) licenses)
Sellers' obligations under the preceding sentence shall be waived as to each
applicable liquor (beer) license (it being further acknowledged that the
customary arrangements contemplated above may differ in various jurisdictions),
(iii) REITCO is a publicly traded company and has a material and on-going
interest in maintaining strict controls over the public's perception of REITCO
and its affiliates, which interest shall be a material concern to both Buyer and
Sellers in establishing any contemplated customary arrangements.
(c) It is the intention of the Buyer pursuant to this Section 4.11 (which
intention is acknowledged by the Sellers in agreeing to (i) use their
commercially reasonable efforts to preserve or obtain the necessary licenses and
consents as provided in (a) above, and (ii) make available, on customary terms
reasonably acceptable to Sellers, the rights and benefits of Sellers' existing
liquor licenses as provided in (b) above), that to the maximum extent reasonable
and provided that the terms of this Section 4.11 are satisfied, there shall be
little or no interruption in the sale of alcohol at any Property.
Section 4.12 Environmental Assessments. Prior to the Closing Date, Buyer
and Buyer's environmental consultant, which consultant shall be reasonably
satisfactory to Sellers (it being agreed that ATC is reasonably satisfactory),
shall be permitted reasonable access to the Properties (or any one or more of
them), for the sole purpose of conducting Phase I environmental site assessments
of such Properties which conform to the ASTM Standard Practice for Environmental
Site Assessments: Phase I Process E 1527-97, modified to include a limited
asbestos survey. Such access shall be under reasonable terms and conditions so
as not to materially interfere with the operations of the Sellers. In the event
that Buyer's environmental consultant, upon the conclusion of the Phase I site
assessment, reasonably recommends any Phase II assessment or subsurface
investigation of the Properties, including but not limited to soil, sediment or
groundwater testing or sampling, borings, installation or sampling of monitoring
xxxxx (generally, "Phase II Investigations"), permission for access to perform
such Phase II Investigations must be obtained in writing from the Sellers in
advance of any such activity, such permission not to be unreasonably withheld or
delayed (and to be granted provided that such Phase II Investigations are of a
usual and customary nature in consideration of the issue which is the subject
matter of such Phase II Investigation). If Buyer conducts any Phase II
Investigations on the Properties, Buyer agrees to indemnify and hold Sellers
harmless from any and all damages, losses, liabilities, expenses, costs, claims,
actions, suits, proceedings, assessments, orders, judgments, fines and penalties
(including without limitation, reasonable legal, accounting, consulting,
engineering and other expenses), which may be incurred, arise out of or result
from any acts and omissions of Buyer, its employees, agents and representatives
taken in connection with such Phase II Investigations. This provision, and any
rights with respect to pre-closing environmental investigations, testing and/or
site assessments, applies only to the Properties. Any and all testing,
investigations and/or site assessments shall be at the sole cost and expense of
the Buyer.
Section 4.13 Property Holdback Rights. On or prior to the date which is
fifteen (15) days prior to the Closing Date (as the same may have been extended
by Sellers in accordance with Section 1.4 above, the "Holdback Designation
Date"), Sellers shall have the right to deliver to the Buyer a property holdback
designation letter for any Property (a "Holdback Property") for which a Required
Consent under a ground lease or other agreement identified on Schedule 4.13 has
not been obtained by such date (a "Holdback Letter") in accordance with the
terms, conditions and limitations set forth in this Section 4.13. Sellers'
failure to deliver to the Buyer, on or prior to the Holdback Designation Date,
an executed Holdback Letter shall be conclusively deemed as Sellers'
confirmation of the absence of any Holdback Properties. Sellers specifically
waive any right to deliver a Holdback Letter after the Holdback Designation Date
unless the Sellers incur all costs incurred in connection with the exercise of
the rights hereunder, including any incremental costs resulting from such
failure to timely deliver a Holdback Letter. Notwithstanding the delivery of a
Holdback Letter by the Sellers with respect to any one or more Holdback
Properties, the Buyer shall have the right, by written notice delivered to the
Sellers on or before the date which is ten (10) days prior to the Closing Date
(or such later date if accepted by the Sellers), to waive the Required Consent
requirement with respect to any or all such Holdback Properties and to
thereafter proceed to Closing with respect to such Holdback Properties as if
such Required Consent had been obtained.
Notwithstanding anything to the contrary contained in this Agreement, and for
the purposes of this Section 4.13 only, the Buyer and the Sellers irrevocably
agree that the allocated purchase price (individually and collectively, the
"Allocated Value") with respect to each Property that could become a Holdback
Property (i.e., the Properties identified on Schedule 4.13), in the event such
Property becomes a Holdback Property hereunder, is as set forth on Schedule
4.13, it being further acknowledged that such allocation does not have any
bearing or relationship to, and has been derived independently from, the
allocation of the Purchase Price set forth elsewhere in this Agreement.
With respect to each Holdback Property, the Closing Date with respect to such
Holdback Property shall be deferred to the earlier of (x) the day which is six
(6) months after the Closing Date, or (y) the day that is fifteen (15) days
following receipt of the applicable Required Consent (the "Holdback Property
Closing Date").
With respect to each Holdback Property, Buyer and Sellers, respectively, shall
remain fully obligated to purchase and sell (i) such Holdback Properties (or the
Acquired Shares of the entity which owns such Holdback Property) and (ii) all
other Acquired Shares (and the Properties related thereto) on the terms and
conditions set forth in this Agreement, provided that (i) the aggregate Purchase
Price payable on the Closing Date, pursuant to Section 1.3(a) above applicable
to all other Acquired Shares (and the Properties related thereto) shall be (x)
reduced by the Allocated Value of the Holdback Property or Holdback Properties.
Any costs incurred with respect to the holdback of a Holdback Property (which
may include a real property transfer) shall be for the account of the Sellers.
With respect to the Holdback Properties, (i) an amount equal to four percent
(4%) of the Allocated Value of each Holdback Property shall be retained by the
Escrow Agent as a continuing deposit subject to disposition, as liquidated
damages, in accordance with Article IX as to such Holdback Property; and (ii)
the Closing Date with respect to the Holdback Properties shall be the Holdback
Property Closing Date. It is the intention of the parties hereunder that: the
Holdback Property Closing Date shall be deemed to be the Closing Date with
respect to the Holdback Properties under this Agreement; that on the Holdback
Property Closing Date the Holdback Properties (or the Acquired Shares related
thereto) shall be conveyed to the Buyer in exchange for the Allocated Value for
each Holdback Property, and that; with respect to the Holdback Properties, the
date of March 31, 1999 as set forth in Section 9.1(b) shall be deemed to be
September 30, 1999, time being of the essence with respect to such dates.
The Sellers and the Buyer agree that, with respect to each Holdback Property,
the applicable Acquired Company and the Buyer shall, with respect to the period
ending on the Holdback Property Closing Date with respect to each applicable
Holdback Property, enter into such management or other arrangements, each in
form and substance reasonably acceptable to the Buyers and Sellers, but only if
such arrangements can be entered into and performed without violating the
provisions of any law or any agreement or other contracts relating to the
applicable Holdback Property so as to provide Buyer, to the maximum extent
reasonably possible, with the net economic benefits as if such Holdback Property
had been acquired by Buyer on the initial Closing Date.
Section 4.14 Observation Rights; Certain Communications.
(a) Commencing on the date which is one (1) Business Day after the date of
this Agreement, Buyer's representatives shall have the right, from time to time,
to visit and observe all of the Properties and Cobblestone corporate and
regional headquarters during normal business hours, provided, however, that such
visits and observations shall not unreasonably interfere with the normal
business operations of the Acquired Companies. Such visitation and observation
rights shall include the right to attend all meetings relating to the
operations, management, financial and accounting matters of the Acquired
Companies, including, but not limited to, all meetings attended by persons
identified in Section 2.18(c) excluding meetings relating to the conveyance of
the Acquired Companies to Buyer. Sellers shall use their good faith and
commercially reasonable efforts to provide timely notice to Buyer's
representatives of each of such meetings and to accommodate Buyer's
representatives' reasonable requests for access to office space, services and
equipment. Buyer's rights hereunder shall be subject, in all events, to the
Confidentiality Agreement (as defined in Section 4.4).
(b) The Buyer and Sellers agree that, in the event Buyer identifies issues
with respect to the operation or management of the Acquired Companies in
connection with the exercise of its rights under Section 4.14(a) hereof that
Buyer believes in good faith and in its commercially reasonable business
judgment to be detrimental to, or to have an adverse impact on, the Acquired
Companies or their respective operations, representatives of the Buyer may
engage in discussions about such issues with the Sellers' Designees. The Buyer
and the Sellers, through the Sellers' Designees, agree to communicate and to
work together in good faith with respect to such issues in order to correct such
issues, if appropriate, or to develop a plan or process to address any such
issues in order to preserve the Acquired Companies operations and reputation
[goodwill]. For purposes, hereof, the term "Sellers' Designees" shall initially
mean Xxxxxxx X. Xxxxxxxx and Xxxxx X. Xxxxxx or such other officer or key
employee of a Seller as may subsequently be identified to Buyer in writing.
(c) The Sellers shall endeavor, in good faith, to notify Buyer promptly
after the Sellers obtain Sellers' Knowledge (as defined in Section 2.18(a)
hereof) of any breach of any of Sellers' covenants under Section 4.1, provided,
however, that (i) Sellers shall have no obligation to notify Buyer of any breach
of which Buyer has Buyer's Knowledge (as defined in Section 3.8, but including
for such purposes the knowledge of those individuals who may from time to time
perform those actions permitted by Section 4.14(a) and (b) hereof), and (ii)
Sellers agreement hereunder shall not impose any additional liability or
obligation under this Agreement.
ARTICLE V
EMPLOYEE MATTERS
Section 5.1 Employees.
(a) The Buyer shall ensure that all persons who were employed by the
Acquired Companies immediately preceding the Closing Date, including those on
vacation, leave of absence or disability (the "Acquired Companies Employees"),
will remain employed in a comparable position on and immediately after the
Closing Date for such period of time as determined by the Buyer, at not less
than the same base rate of pay, except as otherwise provided in this Section
5.1. Notwithstanding the foregoing, the Buyer shall not, at any time prior to
60 days after the Closing Date, effectuate a "plant closing" or "mass layoff" as
those terms are defined in the Worker Adjustment and Retraining Notification Act
of 1988 ("WARN"), or comparable conduct under any applicable state law,
affecting in whole or in part any facility, site of employment, operating unit
or employee of any of the Acquired Companies without complying fully with the
requirements of WARN.
(b) To the extent permissible under applicable law and to the extent that
service is relevant for purposes of eligibility and vesting under any employee
benefit plan, program or arrangement established or maintained by the Buyer
(other than any defined benefit pension plan) following the Closing Date for the
benefit of Acquired Companies Employees at such time as any employee benefit
plan, program or arrangement is made available to Acquired Companies Employees,
such plan, program or arrangement shall credit such employees for service on or
prior to the Closing Date that was recognized by the Sellers or the Acquired
Companies, as the case may be, for purposes of employee benefit plans, programs
or arrangements (including vacation policies) maintained by any of them. In
addition, with respect to any welfare benefit plan (as defined in Section 3(1)
of ERISA) established or maintained by the Buyer following the Closing Date for
the benefit of Acquired Companies Employees, to the extent permissible under
applicable law, such plan shall waive any pre-existing condition exclusions and
provide that any covered expenses incurred during the 1999 plan year on or
before the Closing Date by an Acquired Company Employee or by a covered
dependent shall be taken into account for purposes of satisfying applicable
deductible coinsurance and maximum out-of-pocket provisions after the Closing
Date.
(c) Buyer agrees that either Buyer or the Acquired Companies will make COBRA
continuation coverage available to individuals who are COBRA qualified
beneficiaries under the Benefit Plans immediately prior to the Closing Date.
Section 5.2 Employee Benefits. For a period of one year following the
Closing Date, the Buyer shall provide the Acquired Companies Employees with
benefits that either are (i) substantially comparable, in the aggregate, to the
benefits provided under the Benefit Plans as in effect immediately prior to the
Closing Date or (ii) the same as the benefits generally made available to a
majority of the Buyer's similarly situated employees.
Section 5.3 Other Employee Benefits. From and after the Closing Date, Buyer
will, or will cause the Acquired Companies to, honor in accordance with their
terms all of the severance payments pursuant to Severance Arrangements between
any of the Acquired Companies and the Acquired Companies Employees in effect as
of the date hereof and listed on Schedule 2.12(a). Seller shall honor and be
liable for all payments related to the Retention Bonuses.
Section 5.4 Indemnity. Anything in this Agreement to the contrary
notwithstanding, (i) the Buyer hereby agrees to indemnify the Sellers and their
respective Affiliates against and hold the Sellers and their respective
Affiliates harmless from any and all Losses arising out of or otherwise in
respect of (a) any claim made by any Acquired Company Employee against the
Sellers or any of their Affiliates for any severance or termination benefits
pursuant to the provisions of the Severance Arrangements or any applicable
federal or state law arising after the Closing, (b) any action taken after the
Closing by the Buyer with respect to any plan (including any Benefit Plan), (c)
any claim for payments or benefits by Acquired Companies Employees or their
beneficiaries under any Benefit Plan, and (d) any failure of the Buyer to
discharge their obligations under this Article V, and (ii) the Sellers hereby
jointly and severally agree to indemnify the Buyer and its Affiliates against
and hold the Buyer and its Affiliates harmless from any and all Losses arising
out of or otherwise in respect of any claim made by any Acquired Company
Employee against the Buyer or any of its Affiliates for any Retention Bonuses,
in the case of clauses (i) and (ii), without regard to the Threshold Amount or
the Maximum Amount (as defined in Article VIII hereof); provided, however, that
the procedural requirements of Sections 8.2 and 8.3 shall apply to Sellers' and
the Buyer's indemnification obligations under this Section 5.4.
Section 5.5 No Third Party Beneficiaries. Notwithstanding anything else
contained herein to the contrary, nothing in this Article V shall be construed
to create any third party beneficiary rights in any person who is not a party to
this Agreement.
ARTICLE VI
TAX MATTERS
Section 6.1 Conveyance Taxes; Costs. The Buyer shall be liable for and
shall hold the Sellers harmless against any real property transfer, sales, use,
transfer, value added, excise, stock transfer, stamp, recording, registration
and any similar Taxes that become payable in connection with the acquisition by
the Buyer contemplated hereby, and the applicable parties shall file such
applications and documents as shall permit any such Tax to be assessed and paid
on or prior to the Closing Date in accordance with any available pre-sale filing
procedure. The Sellers agree to cooperate with the Buyer and, subject to the
other terms of this Agreement, to take any action reasonably requested by the
Buyer, at no cost to the Sellers, in order to minimize the amount of such Taxes.
The parties shall execute and deliver all instruments and certificates necessary
to permit compliance with the foregoing. The Buyer shall pay the entire cost of
any title insurance (for itself or any lender, including lenders of indebtedness
assumed by the Buyer hereunder), surveys, title inspections, and appraisals that
the Buyer elects to obtain in connection with the transactions contemplated
hereby. The Buyer shall pay any and all attorneys' fees of its lenders and
lenders of indebtedness assumed by the Buyer hereunder.
Section 6.2 Treatment of Indemnity Payments. All payments made by the
Sellers or the Buyer, as the case may be, to or for the benefit of the other
party pursuant to any indemnification obligations under this Agreement shall be
treated as adjustments to the consideration for Tax purposes, and such agreed
treatment shall govern for purposes of this Agreement.
Section 6.3 Employee Withholding. The Sellers and the Buyer agree that,
pursuant to and to the extent permitted by the "Alternative Procedure" provided
in Section 5 of Revenue Procedure 84-77, 1984-2 C.B. 753, with respect to filing
and furnishing IRS Forms W-2, W-3 and 941, (a) the Sellers and the Buyer shall
each report on a "predecessor-successor" basis, as set forth therein, (b) the
Sellers shall be relieved from furnishing Forms W-2 for the 1999 calendar year
to any of the Sellers' employees that become employees of the Buyer and (c) the
Buyer shall assume the obligations of the Sellers to furnish such Forms W-2 to
such employees for the full 1999 calendar year.
ARTICLE VII
CONDITIONS TO CLOSING
Section 7.1 Conditions to the Obligations of Each Party. The respective
obligations of each party to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction or waiver, at or prior to the
Closing, of each of the following conditions, any or all of which may be waived,
in whole or in part by the parties hereto (but only to the extent that such
matter is a precondition to the obligations of such waiving party), to the
extent permitted by applicable law:
(a) HSR Act. Any waiting period (and any extension thereof) under the HSR
Act applicable to the transactions to be consummated at the Closing shall have
expired or been terminated; and
(b) No Order. No Governmental Authority or court of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, injunction or other order (whether temporary, preliminary or
permanent) that is in effect and has the effect of making the transactions
contemplated by this Agreement for the Closing illegal or otherwise restraining
or prohibiting consummation of such transactions; provided, however, that the
provisions of this Section 7.1(b) shall not apply to a party unless such party
has used its best efforts to have any such order or injunction vacated.
Section 7.2 Conditions to Obligations of the Sellers. The obligations of
the Sellers to consummate the transactions contemplated by this Agreement shall
be subject to the satisfaction or waiver, at or prior to the Closing, of each of
the following conditions:
(a) Covenants. All covenants contained in this Agreement to be complied
with by the Buyer on or before the Closing shall have been complied with in all
respects except where the failure to so comply would not have a material adverse
effect on the Buyer's ability to perform its obligations under this Agreement,
and the Sellers shall have received a certificate of the Buyer to such effect
signed by a duly authorized officer of the Buyer; and
(b) Consents. The Buyer shall have received the authorizations, orders,
approvals and consents of Governmental Authorities and third parties described
in Schedules 3.3(a) and 3.3(b), in form and substance reasonably satisfactory to
the Sellers, except where the failure to so receive would not have a material
adverse effect on the Buyer's ability to perform its obligations under this
Agreement.
Section 7.3 Conditions to Obligations of the Buyer. The obligations of
the Buyer to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction or waiver by the Buyer, at or prior to the Closing,
of each of the following conditions:
(a) Covenants. All covenants contained in this Agreement (except for those
contained in Sections 4.1(a)(A) through 4.1(a)(G) and in Section 4.1(c) hereof)
to be complied with by the Sellers on or before the Closing shall have been
complied with in all respects, except where the failure to so comply would not
have (A) a Material Adverse Effect or (B) a material adverse effect on the
Sellers' ability to perform their obligations under this Agreement, and the
Buyer shall have received a certificate of the Sellers to such effect signed by
a duly authorized officer thereof;
(b) Consents. The Buyer, Sellers, and the Acquired Companies, as
applicable, shall have received (A) those consents to the transactions
contemplated hereby listed on Schedule 7.3(b) hereto (the "Required Consents"),
subject in all circumstances to Section 4.13, and (B) the authorizations,
orders, approvals and consents of Governmental Authorities and third parties
described in Schedules 2.6(a) and 2.6(b) in form and substance reasonably
satisfactory to the Buyer, except where the failure to so receive would not have
(A) a Material Adverse Effect or (B) a material adverse effect on the Sellers'
ability to perform their obligations under this Agreement;
(c) FIRPTA Withholding. At or prior to the Closing, the Buyer shall have
received from each Seller a "transferor's certificate of non-foreign status" as
provided in the Treasury Regulations under Section 1445 of the Code in the form
attached hereto as Exhibit D;
(d) Absence of Certain Breaches. There shall not then exist a breach or
multiple breaches of (i) any representation or warranty of the Sellers which
would give rise to aggregate Losses in excess of an amount equal to the
Threshold Amount plus the Maximum Amount (as each is hereinafter defined); or
(ii) any of the covenants of the Sellers contained in Sections 4.1(a)(A) through
4.1(a)(G) or Section 4.1(c) which has given rise to, or will give rise to,
aggregate Losses (including for such purpose only, the impairment of the fair
market value of the Properties and assets of the Acquired Companies) in excess
of $500,000, which breach or multiple breaches, in the case of subclause (i) and
subclause (ii) of this Section 7.3(d), remains uncured as of the Closing (as the
same may be extended pursuant to Section 1.4 hereof); provided, however, that,
in the event the Sellers elect to cure any such breach contemplated hereby, the
Sellers shall fully cure such breach;
(e) Legal Opinion. The Buyer shall have received from counsel to the
Sellers an opinion in form reasonably acceptable to the Buyer, that each of the
Sellers is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has all the requisite
corporate power and authority to enter into this Agreement, to carry out its
obligations hereunder and to consummate the transactions contemplated hereby;
and
(f) Absence of Significant Environmental Liabilities. The investigations,
tests and site assessments permitted to be conducted pursuant to Section 4.12
hereof shall not have revealed Significant Environmental Liabilities (as defined
in Section 9.1(e) hereof).
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Survival.
(a) Subject to the limitations and other provisions of this Agreement, the
representations and warranties of the parties hereto contained herein, as the
case may be, shall survive the Closing and shall remain in full force and
effect, for a period of one (1) year after the Closing Date; provided, however,
that the representations and warranties of the parties contained in Sections
2.1, 2.2, 2.17, 3.1 and 3.6 shall survive the Closing in perpetuity and the
representations and warranties of the Sellers contained in Sections 2.8 and 2.9
shall survive until the seven (7) year anniversary of the Closing Date.
(b) Subject to the limitations and other provisions of this Agreement,
including Section 8.1(a) above, each covenant and agreement of the parties
hereto contained herein shall survive the Closing and shall remain in full force
and effect for: (i) one (1) year or (ii) until the end of the applicable period
specified elsewhere in this Agreement with respect to such covenant or
agreement.
Section 8.2 Indemnification by the Sellers
(a) The Sellers jointly and severally agree, subject to the other terms and
conditions of this Agreement, to indemnify the Buyer and its Affiliates,
officers, directors, employees, agents, successors and assigns (each a "Buyer
Indemnified Party") against and hold them harmless from all Losses arising out
of (i) the breach of any representation or warranty of the Sellers contained in
this Agreement other than in Sections 2.1 and 2.2 (the "Organization Reps"),
Section 2.8 (the "Tax Reps"), Section 2.9 (the "Benefit Plan Reps") and Section
2.17 (the "Broker's Fee Reps"), (ii) the breach by the Sellers of any of the
Organization Reps, the Tax Reps, the Benefit Plan Reps or the Broker's Fee Reps,
(iii) any breach of any covenant or agreement of the Sellers contained herein,
(iv) the following litigation and claims (the "Indemnified Disputes"): Xxxxxxx
Xxxxxxxxx, et al. v. Meditrust Acquisition Company and Meditrust Company,
L.L.C., Case No. 98-CVS-02857: Forsgate Golf, L.L.C. v. Meditrust Golf Group
II, Inc., Civil Action Number 98-4327 (JCL) and the claim by Xxxx Xxxx d/b/a
Xxxx Properties against Cobblestone Texas, Inc., and (v) any action brought by
any shareholder of The Meditrust Companies ("Shareholder Action") claiming a
breach of the fiduciary duties of the Boards of Directors of The Meditrust
Companies in connection with the conveyance of the Acquired Companies by the
Sellers to the Buyer under this Agreement. For purposes of this Agreement,
claims for Losses arising out of any Shareholder Action, the Indemnified
Disputes or breach by Sellers of any of the Organization Reps, Tax Reps, Benefit
Plan Reps or Broker's Fee Reps shall be referred to herein as the "Excluded
Claims". Anything in Section 8.1 to the contrary notwithstanding, no claim may
be asserted nor any action commenced against the Sellers for breach of any
representation or warranty contained herein, unless written notice of such claim
or action is received by the Sellers describing in detail the facts and
circumstances with respect to the subject matter of such claim or action on or
prior to the thirtieth (30th) day after the date on which the representation or
warranty on which such claim or action is based ceases to survive as set forth
in Section 8.1 (the "Indemnification Cut-Off Date"), and such claim or action
arose on or prior to the date such representation or warranty ceased to survive,
in which case such representation or warranty, and the Buyer's right to
indemnification hereunder will survive as to such claim until such claim has
been finally resolved in accordance with the terms of this Article VIII.
(b) The indemnification obligations of the Sellers pursuant to Section
8.2(a) (excluding the indemnification obligations of the Sellers for Excluded
Claims; the amount paid with respect to Excluded Claims shall not be counted in
any calculation of the Threshold Amount or the Maximum Amount) shall not be
effective until the aggregate dollar amount of all Losses (including without
limitation Sellers' expenses of defending and/or settling any claim or dispute
giving rise to such indemnification obligation) that would otherwise be
indemnifiable pursuant to Section 8.2(a) exceeds one percent (1%) of the
aggregate Purchase Price (the "Threshold Amount"), and then only to the extent
such aggregate amount exceeds the Threshold Amount. The indemnification
obligations of the Sellers pursuant to Section 8.2(a) (excluding the
indemnification obligations of the Sellers related to Excluded Claims) shall be
effective only until the dollar amount paid in respect of the Losses (including
without limitation Sellers' expenses of defending and/or settling any claim or
dispute giving rise to such indemnification obligation) indemnified against
under Section 8.2(a) (excluding the indemnification obligations of the Sellers
related to Excluded Claims) equals five percent (5%) of the aggregate Purchase
Price (the "Maximum Amount") for all Losses. For purposes of determining the
Threshold Amount and the Maximum Amount hereunder, the Purchase Price shall be
the sum calculated in accordance with Section 1.3(a) hereof, using the amount of
$386,000,000 in place of the amount of $391,278,000.
For purposes of this Section 8.2(b), in computing such individual or aggregate
amounts of claims, the amount of any insurance proceeds and any indemnity,
contribution or other similar payment actually received by the Buyer Indemnified
Parties from any third party with respect thereto shall be deducted from each
such claim.
(c) [Not applicable]
(d) A Buyer Indemnified Party shall give the Sellers written notice of any
claim, assertion, event or proceeding by or in respect of a third party as to
which such Buyer Indemnified Party may request indemnification hereunder or as
to which the Threshold Amount may be applied as soon as is practicable and in
any event within thirty (30) days of the time that such Buyer Indemnified Party
learns of such claim, assertion, event or proceeding; provided, however, that
the failure to so notify the Sellers shall not affect rights to indemnification
hereunder except to the extent that the Sellers are actually prejudiced by such
failure. The Sellers shall have the right to direct, through counsel of their
own choosing, the defense or settlement of any such claim or proceeding at their
own expense. If the Sellers elect to assume the defense of any such claim or
proceeding, the Sellers shall consult with the Buyer Indemnified Party and the
Buyer Indemnified Party may participate in such defense, but in such case the
expenses of the Buyer Indemnified Party shall be paid by the Buyer Indemnified
Party. The Buyer Indemnified Party shall provide the Sellers with access to its
records and personnel relating to any such claim, assertion, event or proceeding
during normal business hours and shall otherwise cooperate with the Sellers in
the defense or settlement thereof, and the Sellers shall reimburse the Buyer
Indemnified Party for all its reasonable out-of-pocket expenses in connection
therewith. If the Sellers elect to direct the defense of any such claim or
proceeding, the Buyer Indemnified Party shall not pay, or permit to be paid, any
part of any claim or demand arising from such asserted liability unless the
Sellers consent in writing to such payment or unless the Sellers, subject to the
last sentence of this Section 8.2(d), withdraw from the defense of such asserted
liability or unless a final judgment from which no appeal may be taken by or on
behalf of the Sellers is entered against the Buyer Indemnified Party for such
liability. If the Sellers fail to defend or if, after commencing or undertaking
any such defense, the Sellers fail to prosecute or withdraw from such defense,
the Buyer Indemnified Party shall have the right to undertake the defense or
settlement thereof, at the Sellers' expense. If the Buyer Indemnified Party
assumes the defense of any such claim or proceeding pursuant to this Section
8.2(d) and proposes to settle such claim or proceeding prior to a final judgment
thereon or to forego any appeal with respect thereto, then the Buyer Indemnified
Party shall give the Sellers prompt written notice thereof, and the Sellers
shall have the right to participate in the settlement or assume or reassume the
defense of such claim or proceeding.
(e) The Buyer hereby acknowledges and agrees that from and after the
Closing, its sole and exclusive remedy with respect to any and all claims
relating to this Agreement, including the Acquired Shares, shall be pursuant to
the indemnification provisions set forth in this Article VIII. In furtherance
of the foregoing and except as specified herein, the Buyer hereby waives, to the
fullest extent permitted under applicable Law, any and all rights, claims and
causes of action relating to the subject matter of this Agreement that they may
have against the Sellers arising under or based upon any Law (including, without
limitation, any such rights, claims or causes of action arising under or based
upon common law or otherwise).
(f) Except as set forth in this Agreement, the Sellers are not making any
representation, warranty, covenant or agreement with respect to the matters
contained herein. Anything herein to the contrary notwithstanding, no breach of
any representation, warranty, covenant or agreement contained herein shall give
rise to any right on the part of the Buyer, after the consummation of the
transactions contemplated hereby, to rescind this Agreement or any of the
transactions contemplated hereby.
(g) The Sellers shall have no liability under any provision of this
Agreement for and in no event shall the Threshold Amount be applied to any
consequential damages. The Buyer shall take all reasonable steps to mitigate
Losses for which indemnification may be claimed pursuant to this Agreement upon
and after becoming aware of any event that could reasonably be expected to give
rise to any such Losses.
Section 8.3 Indemnification by the Buyer.
(a) The Buyer agrees, subject to the other terms and conditions of this
Agreement to indemnify the Sellers and its Affiliates, officers, directors,
employees, agents, successors and assigns (each a "Seller Indemnified Party")
against and hold them harmless from all Losses arising out of (i) the breach of
any representation or warranty of the Buyer contained herein, and (ii) any
breach of any covenant or agreement of the Buyer contained herein. Anything in
Section 8.1 to the contrary notwithstanding, no claim may be asserted nor may
any action be commenced against the Buyer for breach of any representation or
warranty contained herein, unless written notice of such claim or action is
received by the Buyer describing in detail the facts and circumstances with
respect to the subject matter of such claim or action on or prior to the
thirtieth (30th) day after the date on which the representation or warranty on
which such claim or action is based ceases to survive as set forth in Section
8.1, and such claim or action arose on or prior to the date such representation
or warranty ceased to survive, in which case such representation or warranty
will survive as to such claim until such claim has been finally resolved.
(b) The indemnification obligations of the Buyer pursuant to Section 8.3(a)
shall not be effective until the aggregate dollar amount of all Losses
(including without limitation the Buyer's expenses of defending and/or settling
any claim or dispute giving rise to such indemnification obligation) that would
otherwise be indemnifiable pursuant to Section 8.3(a) exceeds the Threshold
Amount, and then only to the extent such aggregate amount exceeds the Threshold
Amount. The indemnification obligations of the Buyer pursuant to Section 8.3(a)
shall be effective only until the dollar amount paid in respect of the Losses
(including without limitation the Buyer's expenses of defending and/or settling
any claim or dispute giving rise to such indemnification obligation) indemnified
against under Section 8.3(a) aggregates to equal the Maximum Amount. For
purposes of this Section 8.3(b), in computing such individual or aggregate
amounts of claims, the amount of any insurance proceeds and any indemnity,
contribution or other similar payment actually recovered by the Seller
Indemnified Parties from any third party with respect thereto shall be deducted
from each such claim.
(c) [Not applicable]
(d) A Seller Indemnified Party shall give the Buyer written notice of any
claim, assertion, event or proceeding by or in respect of a third party as to
which such Seller Indemnified Party may request indemnification hereunder or as
to which the Threshold Amount may be applied as soon as is practicable and in
any event within thirty (30) days of the time that such Seller Indemnified Party
learns of such claim, assertion, event or proceeding; provided, however, that
the failure to so notify the Buyer shall not affect rights to indemnification
hereunder except to the extent that the Buyer is actually prejudiced by such
failure. The Buyer shall have the right to direct, through counsel of its own
choosing, the defense or settlement of any such claim or proceeding at its own
expense. If the Buyer elects to assume the defense of any such claim or
proceeding, the Buyer shall consult with the Seller Indemnified Party, the
Seller Indemnified Party may participate in such defense, but in such case the
expenses of the Seller Indemnified Party shall be paid by the Seller Indemnified
Party. The Seller Indemnified Party shall provide the Buyer with access to its
records and personnel relating to any such claim, assertion, event or proceeding
during normal business hours and shall otherwise cooperate with the Buyer in the
defense or settlement thereof, and the Buyer shall reimburse the Seller
Indemnified Party for all the reasonable out-of-pocket expenses of such Seller
Indemnified Party in connection therewith. If the Buyer elects to direct the
defense of any such claim or proceeding, the Seller Indemnified Party shall not
pay, or permit to be paid, any part of any claim or demand arising from such
asserted liability, unless the Buyer consents in writing to such payment or
unless the Buyer, subject to the last sentence of this Section 8.3(d), withdraws
from the defense of such asserted liability, or unless a final judgment from
which no appeal may be taken by or on behalf of the Buyer is entered against the
Seller Indemnified Party for such liability. If the Buyer fails to defend or
if, after commencing or undertaking any such defense, the Buyer fails to
prosecute or withdraws from such defense, the Seller Indemnified Party shall
have the right to undertake the defense or settlement thereof, at the Buyer's
expense. If the Seller Indemnified Party assumes the defense of any such claim
or proceeding pursuant to this Section 8.3(d) and proposes to settle such claim
or proceeding prior to a final judgment thereon or to forego appeal with respect
thereto, then such Seller Indemnified Party shall give the Buyer prompt written
notice thereof and the Buyer shall have the right to participate in the
settlement or assume or reassume the defense of such claim or proceeding.
(e) The Sellers hereby acknowledge and agree that from and after the
Closing, their sole and exclusive remedy with respect to any and all claims
relating to this Agreement shall be pursuant to the indemnification provisions
set forth in this Article VIII. In furtherance of the foregoing and except as
specified herein, the Sellers hereby waive to the fullest extent permitted under
applicable Law, any and all rights, claims and causes of action relating to the
subject matter of this Agreement that they may have against the Buyer arising
under or based upon any Law (including, without limitation, any such rights,
claims or causes of action arising under or based upon common law or otherwise).
(f) Except as set forth in this Agreement, the Buyer is not making any
representation, warranty, covenant or agreement with respect to the matters
contained herein. Anything herein to the contrary notwithstanding, no breach of
any representation, warranty, covenant or agreement contained herein shall give
rise to any right on the part of the Sellers, after the consummation of the
transactions contemplated by this Agreement, to rescind this Agreement or any of
the transactions contemplated hereby.
(g) The Buyer shall have no liability under any provision of this Agreement
for and in no event shall the Threshold Amount be applied to any consequential
damages. The Sellers shall take all reasonable steps to mitigate Losses for
which indemnification may be claimed pursuant to this Agreement upon and after
becoming aware of any event that could reasonably be expected to give rise to
any such Losses.
(h) No indemnification shall be payable to a Seller Indemnified Party with
respect to claims asserted by such Seller Indemnified Party pursuant to Section
8.3(a) after the Indemnification Cut-Off Date.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be terminated:
(a) at any time, by the mutual written consent of the Sellers and the Buyer;
(b) by the Sellers if the Closing shall not have occurred on or prior to
March 31, 1999; provided, however, such date may be extended by the Sellers for
additional time as provided in Section 1.4 hereof; provided further, however,
that the right to terminate this Agreement pursuant to this Section 9.1(b) will
not be available to Sellers if, at the time of such termination by Sellers,
their failure to perform any of their obligations under this Agreement has
resulted in the failure of the Closing to occur at the time of such termination,
excluding, however, any such failure of the Sellers to so perform any of their
obligations hereunder that is caused by or is the result of a Buyer's breach of
its obligations hereunder or a failure of the Buyer to satisfy a condition to
the Sellers' performance or obligation under this Agreement, as set forth in
Section 7.2 hereof;
(c) by the Sellers (provided that the Sellers are not then in breach of any
representation, warranty, covenant or other agreement contained herein which
would cause the Sellers to be unable to satisfy the conditions to the Buyer's
performance set forth in Section 7.3 hereof, excluding however, any Sellers'
breach which is caused by or is the result of a Buyer's breach of its
obligations hereunder or a failure of the Buyer to satisfy a condition to
Sellers' performance or obligation under this Agreement, as set forth in Section
7.2 hereof), upon written notice to Buyer, upon a material breach of any
representation, warranty or covenant of the Buyer contained in this Agreement,
provided that such breach is not capable of being cured prior to March 31, 1999
(or, if later, the Closing Date as extended by the Sellers) or, if earlier, has
not been cured within thirty (30) days after the giving of notice thereof by the
Sellers to the Buyer;
(d) by the Buyer, if the Closing shall not have occurred on or prior to the
latest date to which the Sellers may extend the Closing Date pursuant to Section
1.4 hereof (including by reason of the Sellers' inability to satisfy the
precondition to Buyer's obligation under this Agreement set forth in 7.3(d),
Absence of Certain Breaches; provided, however, that Buyer shall have satisfied
all conditions to the Sellers' performance or obligation under this Agreement,
as set forth in Section 7.2 hereof (except only those conditions to Sellers'
performance which cannot be satisfied by Buyer as a result of a Sellers' breach
of its obligations hereunder or a failure or inability of the Sellers to satisfy
a condition to Buyer's performance or obligation, as set forth in Section 7.3)
and Buyer is prepared, as of the date of such termination, to satisfy in all
material respects its obligations under this Agreement, including without
limitation, Article I hereof;
(e) by the Buyer, if the environmental assessments conducted by Buyer
pursuant to Section 4.12 reveal Significant Environmental Liabilities. For
purposes of this subparagraph, "Significant Environmental Liabilities" shall
mean (i) costs and expenses associated with an obligation or responsibility to
conduct cleanup, remedial or response actions at the Properties, as required by
Environmental Law, (ii) costs and expenses associated with actions that are
necessary to come into material compliance with Environmental Laws, or (iii)
fines or penalties incurred pursuant to Environmental Laws, provided that all
liabilities described in subsections (i) - (iii) above are, in the aggregate,
reasonably expected to exceed $10,000,000 over and above any and all
Environmental Liabilities and Costs (as defined in Section 2.14 herein) that may
be associated with the Baseline Condition. The term "Significant Environmental
Liability" shall not include (i) any actual or potential threats of liability
under any Environmental Law with respect to an actual or potential liability
identified solely due to the nature of the present or former use of any property
surrounding the specific Property, so long as the contamination is not on such
Property (or, if such contamination has migrated onto such Property, if the
associated liability is acknowledged to be the obligation of a third-party
unaffiliated with the Sellers, which third-party is capable of satisfying such
liability to the reasonable satisfaction of the Buyer), (ii) any liability for
cleanup, remedial or response actions not required to be performed pursuant to
any Environmental Law, or (iii) any liability for which the responsible party is
reasonably likely to be a party other than an Acquired Company. For purposes of
this subparagraph, "Baseline Condition" shall mean any and all environmental
conditions, including levels of hazardous materials, of, at or related to the
Properties as established by the reports listed in, or the items disclosed on,
Schedule 2.14 hereof; or
(f) by the Sellers if the Sellers decide to enter into a binding definitive
agreement to effect a Superior Proposal; provided, however, that the Sellers
shall first (i) notify Buyer in writing at least five (5) business days prior to
Sellers entering into any binding agreement to effect a Superior Proposal, and
(ii) include in such notice to the Buyer detailed disclosure of all of the terms
and conditions of any Superior Proposal and the Sellers shall be jointly and
severally liable for any payment required under Section 9.2(b) hereof.
Time shall be of the essence for the purposes of this Section 9.1.
Section 9.2 Effect of Termination.
(a) In the event of termination of this Agreement as provided in Section
9.1, this Agreement shall forthwith become void and there shall be no liability
on the part of any party hereto except (a) as set forth in Sections 1.2, 2.17,
3.6, 4.4, and Articles 8, 9 and 10, provided, however, that nothing herein shall
relieve either party from liability for any willful breach hereof.
(b) In the event that on or after the date hereof (provided, however, that
Sellers shall have no such right to terminate this Agreement pursuant to Section
9.1(f) hereof at any time after March 31, 1999), any Seller terminates this
Agreement pursuant to the provisions of Section 9.1(f) hereof, Sellers shall
jointly or severally pay, or cause to be paid to Buyer at the time of
termination of this Agreement, and Buyer shall receive (in addition to the
return of the Deposit (together with interest (if any) actually earned thereon)
contemplated by Section 9.2(c) hereof), as liquidated damages and its sole and
exclusive remedy therefor, the greater of (i) the sum of Twenty-Four Million
U.S. Dollars (US$24,000,000.00), or (ii) fifty percent (50%) of the difference
between the Purchase Price under the terms of this Agreement and the total gross
value of the Superior Proposal accepted by the Sellers, and each party shall be
relieved and released from any further liability and obligation hereunder.
Sellers and the Buyer agree that actual damages accruing from such a termination
of this Agreement are incapable of precise estimation and would be difficult to
prove, that the payments stipulated in this Section 9.2(b) bear a reasonable
relationship to the potential injury likely to be sustained in the event of such
a breach and that the stipulated payments are intended by the parties to provide
just compensation in the event of such a breach and are not intended to compel
performance or to constitute a penalty for nonperformance. If the Sellers fail
to pay promptly to the Buyer any amounts due under this Section 9.2(b), the
Sellers shall be jointly and severally obligated to pay all costs and expenses
(including legal fees and expenses) in connection with any action, including the
filing of any lawsuit or other legal action, taken to collect payment, together
with interest on the amount of any unpaid amount from the date such amount was
required to be paid at an interest rate equal to the prime rate published by The
Wall Street Journal from time to time. The parties hereby acknowledge that the
agreements contained in this Section 9.2(b) are an integral part of the
transactions contemplated by this Agreement.
(c) Upon termination of this Agreement by the parties hereto pursuant to
Section 9.1(a), by the Sellers pursuant to Section 9.1(f) or by Buyer pursuant
to Section 9.1(d) or 9.1(e), Buyer shall be entitled, pursuant to Section
1.2(a)(i) hereof, to the return of the Deposit and all interest (if any)
actually earned thereon and such return, except as provided in Section 9.2(b),
shall constitute Buyer's sole and exclusive remedy for any such termination.
(d) Upon termination by the Sellers pursuant to Section 9.1(b) or 9.1(c)
hereof, the Deposit and all interest (if any) actually earned thereon shall be
delivered when, as and if permitted by Sections 1.2(a)(ii), 1.2(b) and 1.2(c)
hereof.
Section 9.3 Waiver. At any time prior to the Closing, the Buyer and the
Sellers hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any inaccuracies
in the representations and warranties of the other party contained herein or in
any document delivered by the other party pursuant hereto or (c) waive
compliance with any of the agreements of the other party or conditions to its
own obligations contained herein. Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the party to be bound
thereby. Waiver of any term or condition of this Agreement by a party shall not
be construed as a waiver of any subsequent breach or waiver of the same term or
condition by such party, or a waiver of any other term or condition of this
Agreement by such party. The failure of any party to assert any of its rights
hereunder shall not constitute a waiver of any such rights.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Notices. All notices, requests, claims, demands and other
communications under this Agreement will be in writing and will be deemed given
if delivered personally, sent by overnight courier (providing proof of
delivery), or via facsimile to the parties at the following addresses (or at
such other address for a party as specified by like notice):
(a) if to REITCO, to:
Meditrust Corporation
000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attn: President
Facsimile (000) 000-0000
with copies to:
Meditrust Corporation
000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attn: General Counsel
Facsimile (000) 000-0000
and
Xxxxxxx, Procter & Xxxx LLP
Exchange Place
Boston, MA 02109
Attn: Xxxxxxx X. Xxxxx, P.C.
Facsimile (000) 000-0000
and
Xxxxxxx, Procter & Xxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx X. Xxxxxxx, Esq.
Facsimile (000) 000-0000
(b) if to Operating Company, to:
Meditrust Operating Company
000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attn: President
Facsimile: (000) 000-0000
with copies to:
Meditrust Corporation
000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attn: General Counsel
Facsimile (000) 000-0000
and
Xxxxxxx, Procter & Xxxx LLP
Exchange Place
Boston, MA 02109
Attn: Xxxxxxx X. Xxxxx, P.C.
Facsimile (000) 000-0000
and
Xxxxxxx, Procter & Xxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx X. Xxxxxxx, Esq.
Facsimile (000) 000-0000
(c) if to the Buyer, to:
Golf Acquisitions, L.L.C.
0000 XXX Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000-0000
Attn: Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to:
ClubCorp, Inc.
0000 XXX Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000-0000
Attn: General Counsel
Facsimile: (000) 000-0000
and a copy to:
Munsch, Hardt, Xxxx & Xxxx
0000 Xxxx Xxxxxx
0000 Xxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Attn: Xxxx Xxxxxxxxxx, Esq.
Facsimile: (000) 000-0000
Section 10.2 Certain Definitions. For purposes of this Agreement:
(a) An "Affiliate" of any Person means another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first Person;
(b) "Business Day" means any day that is not a Saturday, a Sunday or other
day on which banks are required by law to be closed in New York City or Boston,
Massachusetts;
(c) "Encumbrance" means any security interest, pledge, mortgage, lien
(including without limitation, environmental and tax liens), charge, encumbrance
adverse claim, preferential arrangement or restriction of any kind;
(d) "Losses" of a Person means any and all losses, liabilities (including
liabilities for Taxes), damages, claims, awards, judgments, costs and expenses
(including, without limitation, reasonable attorneys' fees) actually suffered or
incurred by such Person;
(e) "Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity; and
(f) a "Subsidiary" of any Person means another Person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
Person. A "Significant Subsidiary" means any subsidiary of the Buyer or
Sellers, as the case may be, that would constitute a "significant subsidiary" of
such party within the meaning of Rule 1-02 of Regulation S-X of the SEC.
Section 10.3 Interpretation. When a reference is made in this Agreement to
an Article, Section, Annex or Exhibit, such reference will be to an Article or
Section of, or an Annex or Exhibit to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they will be deemed to be followed by
the words "without limitation". The words "hereof", "herein" and "hereunder"
and words of similar import when used in this Agreement will refer to this
Agreement as a whole and not to any particular provision of this Agreement. All
terms used herein with initial capital letters have the meanings ascribed to
them herein and all terms defined in this Agreement will have such defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein. The definitions contained in
this Agreement are applicable to the singular as well as the plural forms of
such terms and to the masculine as well as to the feminine and neuter genders of
such term. Any agreement, instrument or statute defined or referred to herein
or in any agreement or instrument that is referred to herein means such
agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and references to all attachments thereto and instruments incorporated
therein. References to a Person are also to its permitted successors and
assigns.
Section 10.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement and
will become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 10.5 Entire Agreement; No Third-Party Beneficiaries; Severability.
This Agreement (including the documents and instruments referred to herein),
together with the Confidentiality Agreement, constitutes the entire agreement,
and supersedes all prior agreements and understandings (except for the
Confidentiality Agreement), both written and oral, among the parties with
respect to the subject matter of this Agreement. If any term, condition or
other provision of this Agreement is found to be invalid, illegal or incapable
of being enforced by virtue of any rule of law, public policy or court
determination, all other terms, conditions and provisions of this Agreement
shall nevertheless remain in full force and effect.
Section 10.6 Amendment. This Agreement may not be amended or modified except
(a) by an instrument in writing signed by, or on behalf of, the Sellers and the
Buyer or (b) by a waiver in accordance with Section 9.3.
Section 10.7 Governing Law. This Agreement will be governed by, and
construed in accordance with, the internal laws of The Commonwealth of
Massachusetts regardless of the laws that might otherwise govern under
applicable principles of conflict of laws.
Section 10.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement may be assigned, in whole or in
part, by operation of law or otherwise by either of the parties hereto without
the prior written consent of the other party. Any assignment in violation of
the preceding sentence will be void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns. The parties hereto
acknowledge and agree that the rights, interests and obligations under this
Agreement shall remain, in the case of REITCO, exclusively with REITCO in the
event REITCO spins-off its health care financing business as disclosed by the
Sellers in a press release issued November 12, 1998.
Section 10.9 Expenses. Except as otherwise specified in this Agreement, all
costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants, incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the Buyer or
the Sellers, as applicable, incurring such costs and expenses, whether or not
the Closing shall have occurred; provided, however, that, in the event a filing
or filings of a Notification Form pursuant to the HSR Act is required, any
filing fee or fees due in connection therewith shall be shared equally by the
parties hereto.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, Meditrust Corporation, Meditrust Operating Company and the
Buyer have caused this Agreement to be signed by their respective officers
thereunto duly authorized, all as of the date first written above.
MEDITRUST CORPORATION
By: /s/Xxxxxxx X. Xxxxxxxx
Name: Xxxxxxx X. Xxxxxxxx
Title: Senior Vice President
MEDITRUST OPERATING COMPANY
By: /s/Xxxxxxx X. Xxxxx
Name: Xxxxxxx X. Xxxxx
Title: President
GOLF ACQUISITIONS, L.L.C.
By: /s/Xxxxxx X. Xxxxxx, Xx.
Name: Xxxxxx X. Xxxxxx, Xx.
Title: Chief Executive Officer
