Exhibit 10.99
PURCHASE AND SALE AGREEMENT
dated as of October 31, 2005
by and among
CNL HOSPITALITY PARTNERS, LP
CNL KSL PARTNERS GP, LLC
CNL ROSE SPE TENANT CORP.
RFS LEASING VII, INC.
as Sellers
and
KSL RECREATION HOLDINGS I, LLC
KSL RECREATION MANAGEMENT OPERATIONS, LLC
as Purchaser
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS.......................................................................................... 1
1.1 Definitions............................................................................................ 1
ARTICLE II PURCHASE AND SALE.................................................................................... 11
2.1 Purchase and Sale....................................................................................... 11
2.2 Working Capital Adjustment.............................................................................. 11
2.3 Other Closing Adjustments; Cash; Transaction Expenses................................................... 13
2.4 Purchase Price Allocation............................................................................... 13
2.5 Designees............................................................................................... 14
2.6 SHC Deposit............................................................................................. 15
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS............................................................ 15
3.1 Organization and Power.................................................................................. 15
3.2 Authorization and Execution............................................................................. 15
3.3 Ownership of Partnership Interests...................................................................... 15
3.4 Seller Non-Contravention................................................................................ 16
3.5 Insurance............................................................................................... 16
3.6 Bankruptcy.............................................................................................. 16
3.7 Seller Is Not a 'Foreign Person'........................................................................ 16
3.8 KSL-Specific Acquired Entity Tax Matters................................................................ 16
3.9 Special Purpose Entities................................................................................ 17
3.10 Tax Matters............................................................................................. 17
3.11 Brokers................................................................................................. 17
ARTICLE IV [INTENTIONALLY OMITTED].............................................................................. 18
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER.......................................................... 18
5.1 Organization and Power.................................................................................. 18
5.2 Authorization and Execution............................................................................. 18
5.3 Non-contravention....................................................................................... 18
5.4 Litigation.............................................................................................. 18
5.5 Brokers................................................................................................. 18
5.6 LIMITATION ON SELLERS' REPRESENTATIONS AND WARRANTIES................................................... 19
5.7 RELEASE................................................................................................. 20
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TABLE OF CONTENTS
(CONTINUED)
Page
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ARTICLE VI CONDITIONS PRECEDENT................................................................................. 21
6.1 As to Purchaser's Obligations........................................................................... 21
6.2 As to Sellers' Obligations.............................................................................. 22
6.3 Efforts of the Parties.................................................................................. 22
6.4 Failure of Conditions................................................................................... 23
6.5 Waiver by Purchaser..................................................................................... 23
ARTICLE VII COVENANTS OF SELLERS AND PURCHASER................................................................... 23
7.1 Intercompany Debt....................................................................................... 23
7.2 Ordinary Course Contracts; Other Agreements............................................................. 23
7.3 Insurance............................................................................................... 24
7.4 Operation of HdC Prior to Closing....................................................................... 24
7.5 HdC Interests........................................................................................... 25
7.6 Reasonable Inspection................................................................................... 25
7.7 Replacement Debt........................................................................................ 25
7.8 Notification of Certain Matters......................................................................... 26
7.9 Name Change............................................................................................. 26
7.10 No Solicitation......................................................................................... 26
7.11 Liquor Licenses......................................................................................... 26
7.12 Waiver of Transfer Restrictions......................................................................... 27
7.13 Modification of SHC Agreement........................................................................... 27
7.14 Pursuit of North Beach Project.......................................................................... 27
ARTICLE VIII CLOSING.............................................................................................. 27
8.1 Closing................................................................................................. 27
8.2 Seller's Deliveries..................................................................................... 28
8.3 Purchaser's Deliveries.................................................................................. 28
8.4 Mutual Deliveries....................................................................................... 29
8.5 Actions of Escrow Agent................................................................................. 29
8.6 Closing Costs........................................................................................... 29
ARTICLE IX CASUALTY; CONDEMNATION............................................................................... 30
9.1 Fire or Other Casualty.................................................................................. 30
9.2 Condemnation............................................................................................ 30
ARTICLE X DEFAULT; TERMINATION RIGHTS; INDEMNITY............................................................... 31
10.1 Default by Sellers or HdC Parent........................................................................ 31
10.2 Default by Purchaser.................................................................................... 32
10.3 Surviving Claims........................................................................................ 33
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TABLE OF CONTENTS
(CONTINUED)
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10.4 Indemnity............................................................................................... 34
10.5 Indemnification Procedures.............................................................................. 34
10.6 Exclusive Remedy........................................................................................ 35
ARTICLE XI TAX MATTERS.......................................................................................... 35
11.1 Tax Returns............................................................................................. 35
11.2 Contests................................................................................................ 36
11.3 Survival................................................................................................ 36
ARTICLE XII MISCELLANEOUS PROVISIONS............................................................................. 37
12.1 Completeness; Modification.............................................................................. 37
12.2 Assignments............................................................................................. 37
12.3 Successors and Assigns.................................................................................. 37
12.4 Days.................................................................................................... 37
12.5 Governing Law........................................................................................... 37
12.6 Counterparts............................................................................................ 38
12.7 Purchaser's Representative.............................................................................. 38
12.8 Severability............................................................................................ 38
12.9 Notices................................................................................................. 39
12.10 Escrow Agent............................................................................................ 40
12.11 Incorporation by Reference.............................................................................. 41
12.12 Further Assurances...................................................................................... 41
12.13 No Partnership.......................................................................................... 41
12.14 Time of Essence......................................................................................... 41
12.15 Press Releases.......................................................................................... 41
12.16 Signatory Exculpation................................................................................... 41
12.17 Rules of Construction................................................................................... 41
12.18 No Recording............................................................................................ 42
12.19 No Recourse............................................................................................. 42
12.20 Survival................................................................................................ 42
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EXHIBITS AND SCHEDULES
Exhibit A Hotel Legal Description
Exhibit B North Beach Legal Description
Exhibit C Financial Statements
Exhibit D FIRPTA Certificate
Exhibit E HdC Interest Assignment
Exhibit F North Beach Plan and Budget
Exhibit G SHC Agreement
Exhibit H Non-Imputation Affidavit
Schedules
Schedule 1 Acquired Entities and Subsidiary Entities
Schedule 2 HdC Interests
Schedule 3 Expansion Entitlements
Schedule 4 Replacement Debt Criteria
Schedule 2.1 Post-Closing Structure Chart
Schedule 3.3 Tax Matters
Schedule 2.2 Reference Working Capital Amount
Schedule 2.4 Purchase Price Allocation
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is made as of October
31, 2005 (the "Effective Date"), by and among CNL Hospitality Partners, LP, a
Delaware limited partnership ("CNL"), CNL KSL Partners GP, LLC, a Delaware
limited liability company ("CNL GP"), CNL Rose SPE Tenant Corp., a Delaware
corporation ("CNL-Rose"), RFS Leasing VII, Inc., a Tennessee corporation ("CNL
NB-VII") (CNL, CNL GP, CNL-Rose, and CNL NB-VII, each a "Seller" and
collectively, the "Sellers"), and KSL Recreation Holdings I, LLC, a Delaware
limited liability company ("KSL"), and KSL Recreation Management Operations,
LLC, a Delaware limited liability company ("KSL Management") (KSL and KSL
Management collectively, with their respective proportions of ownership of HdC
Interests to be allocated between themselves, the "Purchaser").
R E C I T A L S:
A. The HdC Interests (as defined below) consist of 100% of the outstanding
direct and indirect equity interests in the entities which currently own,
operate and manage HdC (as defined below) which are not currently owned by
Purchaser.
X. Xxxxxxx are the owners of the HdC Interests and desire to sell the HdC
Interests, and Purchaser desires to purchase the HdC Interests, upon the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants, promises and
undertakings of the parties hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties, it is agreed:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms shall have the meanings set forth
below:
"Acquired Entities" (or individually, an "Acquired Entity") shall
mean the HdC Entities and each Subsidiary Entity thereof.
"Action" shall mean any claim, action, suit, arbitration, inquiry,
or proceeding by or on behalf of any Person or any claim, suit, arbitration,
inquiry, proceeding or investigation by or before any Governmental Authority.
"Advance Bookings" shall mean reservations and agreements made or
entered into by Manager in the ordinary course of business prior to Closing for
hotel rooms or meeting rooms to be utilized after Closing, or for special
events, catering services or other hotel services to be provided after Closing
at or by the Hotel.
"Affiliate" of a Person shall mean (i) any other Person that is
directly or indirectly (through one or more intermediaries) controlled by, under
common control with, or controlling such Person, or (ii) any other Person in
which such Person has a direct or indirect
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equity interest constituting at least a majority interest of the total equity of
such other Person. For purposes of this definition, "control" shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of any Person, whether through the
ownership of voting securities, by contract or otherwise; provided, however, in
no event shall KSL II Management Operations, LLC, a Delaware limited liability
company, or any of its Affiliates (other than a Seller or any Acquired Entity)
be deemed an Affiliate of Sellers or any of the Acquired Entities.
"Allocated HdC Interest Adjusted Price" shall have the meaning
ascribed thereto in Section 2.4.
"Allocated HdC Interest Unadjusted Price" shall have the meaning
ascribed thereto in Section 2.4.
"Applicable Laws" shall mean any Laws or restrictive covenants or
deed restrictions affecting HdC or the ownership, operation, use, maintenance or
condition thereof.
"Approval Standard" shall have the meaning ascribed such term in
Section 7.2.
"Authorizations" shall mean all licenses, permits and approvals
required by any Governmental Authority with respect to the construction,
ownership, operation, leasing, maintenance, or use of HdC or any part thereof.
"Breach" shall have the meaning ascribed thereto in Section 2.5.
"Business Day" shall mean any day other than Saturday, Sunday or a
federal holiday on which banks in the State of California are authorized by law
to be closed.
"Casualty Threshold" shall have the meaning ascribed thereto in
Section 9.1.
"Closing" shall mean the consummation of the transactions
contemplated by this Agreement, which shall occur on the Closing Date.
"Closing Date" shall have the meaning ascribed thereto in Section
8.1.
"Closing Documents" shall have the meaning ascribed to such term in
Section 8.1.
"Closing Working Capital" shall have the meaning ascribed thereto in
Section 2.2(b)(viii).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collective Bargaining Agreement" shall mean that certain Collective
Bargaining Agreement dated effective as of July 1, 2005, by and between Manager
and UNITE HERE Local 30, as amended.
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"Common Transaction Costs" shall mean, collectively, (i) such legal,
accounting and consulting fees and costs incurred by the parties in connection
with the transactions contemplated by this Agreement and the SHC Agreement as
the parties shall mutually agree, and (ii) the title and survey costs the
parties would have otherwise borne in an outright sale of all HdC Interests.
"Competing Transaction" shall mean any business combination or
recapitalization involving any or all of the Acquired Entities or any
acquisition or purchase of all or a significant portion of the assets of, or any
material equity interest in, any or all of the Acquired Entities or any other
similar transaction with respect to any of the Acquired Entities involving any
Person or entity other than Purchaser or its Affiliates.
"Contest" shall have the meaning ascribed thereto in Section 11.2.
"Designee" shall have the meaning ascribed thereto in Section 2.5.
"Development Agreement" shall mean that certain Development
Agreement, dated as of February 27, 2003, between L-O Coronado Holding II, Inc.
and the City of Coronado, and assigned by L-O Coronado Holding II, Inc. to Owner
on or about December 18, 2003, as amended.
"Draft Working Capital Closing Statement" shall have the meaning
ascribed thereto in Section 2.2(b)(ii).
"Effective Date" shall have the meaning ascribed thereto in the
preamble of this Agreement.
"Estimated Working Capital" shall have the meaning ascribed thereto
in Section 2.2(b)(i).
"Estimated Working Capital Closing Statement" shall have the meaning
ascribed thereto in Section 2.2(b)(i).
"Escrow Agent" shall mean First American Title Insurance Company,
acting through its office at 000 Xxxxx Xxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxx
00000.
"Existing Debt" shall mean, collectively, (i) those certain first
mortgage and mezzanine loans made by German American Capital Corporation to
certain of the Acquired Entities on or about February 9, 2005, in the original
aggregate principal amount of Four Hundred Million Dollar ($400,000,000), and
(ii) that certain Ten Million Dollar ($10,000,000) revolving loan facility from
Deutsche Bank Trust Company Americas dated as of February 9, 2005, to HdC
Parent.
"Existing Debt Liens" shall mean the mortgage and other security
instruments securing the Existing Debt.
"Existing Loan Documents" shall mean all material loan documents
executed in connection with the Existing Debt.
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"Expansion Entitlements" shall mean any and all of the existing
development rights, building, use or other permits, approvals, authorizations,
licenses and consents obtained from any Governmental Authority in connection
with the pending or proposed construction of the North Beach Project, additional
hotel guest rooms and other improvements upon the Land, including, but not
limited to, (i) the Development Agreement and (ii) those entitlements described
on Schedule 3 hereto.
"Financial Statements" shall mean the balance sheets and operating
statements for fiscal year 2004 and the 6-month period ending June 30 , 2005
hereto as Exhibit C.
"FIRPTA Certificate" shall mean an affidavit under Section 1445 of
the Code in substantially the form hereto as Exhibit D.
"GAAP" shall mean generally accepted United States accounting
principles consistently applied, as appropriately modified by the Uniform
System.
"Governmental Authority" shall mean any federal, state, county,
municipal or other government or any governmental or quasi-governmental agency,
department, commission, court, board, bureau, officer or instrumentality,
foreign or domestic, or any of them.
"GP Interest" shall mean CNL GP's 0.5% general partnership interest
in HdC Parent.
"Hazardous Materials" shall mean any chemical substance (i) which is
defined as a "hazardous substance," "hazardous waste," "hazardous material,"
"pollutant," "contaminant" or "toxic," "explosive," "corrosive," "flammable,"
"infectious," "radioactive," "carcinogenic," or "mutagenic" material under any
Applicable Laws regarding the protection of human health or the environment from
such chemical substances; (ii) diesel fuel or other petroleum hydrocarbons;
(iii) asbestos or asbestos-containing materials or urea formaldehyde foam
insulation, (iv) polychlorinated biphenyls, or (v) radon gas. Hazardous
Materials shall not include substances of kinds and in amounts ordinarily and
customarily used or stored in properties similar to HdC for the purposes of
cleaning, dry cleaning, and other maintenance or operations and otherwise in
substantial compliance with Applicable Laws.
"HdC" shall mean, collectively, the Hotel and the North Beach
Project.
"HdC Entity Assignment" shall mean one or more assignment and
assumption agreements in substantially the form of Exhibit E hereto, whereby
each applicable Seller assigns and Purchaser (or Purchaser's Designee) assumes
all of such Seller's right, title and interest in and to its HdC Interest;
provided, however, such Seller's execution and delivery of, and any, such HdC
Entity Assignment to a Designee shall be and remain subject to the provisions of
Section 2.5.
"HdC Entities" (and individually, an "HdC Entity") shall mean the
entities identified as such on Schedule 1 hereto.
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"HdC Interests" (or individually, an "HdC Interest") shall mean the
partnership interests described on Schedule 2 hereto held by the Sellers
indicated thereon in the HdC Entities.
"HdC Interest Purchase Price" shall have the meaning ascribed
thereto in Section 2.1.
"HdC Marks" shall mean the trade names, trademarks, service marks,
logos, copyrighted identifying materials and other forms of identification used
to identify the Hotel or any of its facilities or operations, including the
names "Hotel del Coronado" and variants thereon and the names used to designate
the restaurant and bar facilities within the Hotel, but excluding (i) any rights
to the name "CNL," "KSL," or any derivative thereof, and (ii) any rights to the
names of any subsidiaries of CNL Hospitality Partners, LP or any derivatives
thereof, in each case, including all rights, trademarks, trademark
registrations, trademark applications, copyrights, copyright registrations and
copyright applications using or including such names.
"HdC Parent" shall mean CNL KSL Partners, LP, a Delaware limited
partnership.
"HdC Venture Agreement" shall mean, collectively, the limited
partnership agreements of HdC Parent and North Beach Developer in effect
immediately prior to the Closing.
"Hotel" shall mean the Hotel del Coronado, located in Coronado,
California, and shall include the Real Property and the Personal Property
associated with the Hotel.
"Hotel Employees" shall mean all employees of Manager employed at
the Hotel.
"Immaterial Contract" shall mean any Operating Agreement, Occupancy
Agreement or Leased Property Agreement entered into in the ordinary course of
business by any Acquired Entity (or Manager on behalf of any Acquired Entity)
which (i) does not require payments in excess of One Hundred Thousand Dollars
($100,000) individually during any consecutive 12-month period or (ii) are
subject to termination by any Acquired Entity on not more than sixty (60) days
notice without penalty or premium; provided, however, that agreements with
Affiliates of any Seller shall not constitute Immaterial Contracts.
"Improvements" shall mean all buildings, improvements, and other
items of real estate located on the Land with respect to HdC.
"Indemnification Claim" shall have the meaning ascribed thereto in
Section 10.5.
"Indemnified Party" shall have the meaning ascribed thereto in
Section 10.5.
"Indemnitor" shall have the meaning ascribed thereto in Section
10.5.
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"Independent Accounting Firm" shall have the meaning ascribed
thereto in Section 2.2(b)(v).
"Insurance Policies" shall mean all policies of insurance maintained
by or on behalf of any Acquired Entity with respect to the general liability of
such Person or with respect to any casualty affecting HdC, its operation, or any
part thereof. For the avoidance of doubt, the parties acknowledge that the
Insurance Policies currently in place will be replaced by the applicable
Acquired Entities at Closing and Sellers shall have no further obligation to
maintain same following the Closing.
"Intangible Personal Property" shall mean, to the extent assignable,
each Acquired Entity's right, title and interest in and to all intangible
personal property owned or possessed by any Acquired Entity and used in
connection with the ownership or operation of HdC, including, without
limitation, (i) Authorizations, (ii) the HdC Marks, (iii) utility and
development rights and privileges, (iv) Hotel-specific (i.e., not used by or in
connection with any hotels other than the Hotel) telephone and telecopy numbers,
domain names, general intangibles, business records, and plans and
specifications pertaining to the Real Property and the Personal Property related
to the Hotel, and (v) Advance Bookings for the Hotel.
"Intercompany Debt" shall mean any debts outstanding of any Acquired
Entity to Sellers and their Affiliates (other than any Acquired Entity). For the
avoidance of doubt, Intercompany Debt shall not include any Existing Debt.
"Inventory" shall mean all inventories of food and beverage in
opened or unopened cases and all in-use or reserve stock of linens, china,
glassware, silver, uniforms, towels, paper goods, soaps, cleaning supplies and
the like with respect to the Hotel.
"Land" shall mean the real estate relating to the Hotel and the
North Beach Project described on Exhibits A and B hereto, respectively.
"Laws" shall mean all laws, statutes, ordinances, rulings and
regulations of the United States, any foreign country, or any domestic or
foreign state, and any political subdivision or agency thereof, including all
decisions of Governmental Authorities having the effect of law in each such
jurisdiction.
"Leased Property" shall mean all leased items of Personal Property,
including, items subject to any capital lease, operating lease, financing lease,
or any similar agreement.
"Leased Property Agreements" shall mean the lease agreements
pertaining to the Leased Property.
"Lien" shall mean any lien, encumbrance, security interest, charge
or mortgage of any nature.
"Losses" shall have the meaning ascribed thereto in Section 10.4(a).
"Manager" shall mean KSL DC Management, LLC, a Delaware limited
liability company.
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"Management Agreement" shall mean that certain Management Agreement
dated as of December 18, 2003, by and between Operating Lessee and Manager, as
amended.
"Mirror Claim" shall have the meaning ascribed thereto in Section
2.5.
"Monetary Title Encumbrance" shall mean any title encumbrance
affecting HdC or the HdC Interests which are comprised of (i) delinquent taxes
or mortgages, deeds of trust, security agreements, or other similar Liens in a
fixed sum (or capable of computation as a fixed sum) securing indebtedness or
obligations which were created or expressly assumed by any Seller or Acquired
Entity, but excluding the Existing Liens, or (ii) judgment Liens or
construction, mechanics, materialmen's or other similar Liens arising by
operation of law, which judgments or other such Liens are liquidated in amount
and which encumber only HdC or an HdC Interest.
"North Beach and Spa and Beachclub Capex Amount" shall mean as of
any relevant determination date the aggregate sum of all hard and soft costs
incurred by any Seller and/or the Acquired Entities in connection with the
development and construction of the North Beach Project and Spa and Beachclub
Project substantially in accordance with the North Beach Plan and Budget and the
applicable Expansion Entitlements, including any required public improvements.
The parties acknowledge and agree that the North Beach and Spa and Beachclub
Capex Amount as of September 30, 2005 is Three Million One Hundred Fifteen
Thousand Dollars ($3,115,000).
"North Beach and Spa and Beachclub Capex Certification" shall have
the meaning ascribed thereto in Section 2.3(c).
"North Beach Developer" shall mean CNL KSL North Beach Development,
LP, a Delaware limited partnership.
"North Beach Loan" shall mean that certain construction loan to
North Beach Developer which may be entered into prior to Closing with the prior
written approval of Seller and Purchaser, the proceeds from which shall be used
to fund the cost of development and construction of the North Beach Project
substantially in accordance with the North Beach Plan and Budget.
"North Beach Loan Documents" shall mean all material loan documents
executed in connection with the North Beach Loan.
"North Beach Plan and Budget" shall mean the development plan and
budget for the North Beach Project in the form of Exhibit G hereto.
"North Beach Project" shall mean that certain limited term occupancy
condominium project and related improvements currently under construction on the
North Beach Property and the related public improvements to the Real Property,
as contemplated by the North Beach Plan and Budget.
"North Beach Property" shall mean the real property relating to the
North Beach Project described on Exhibit B hereto.
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"Occupancy Agreements" shall mean all written leases, concession or
occupancy agreements in effect with respect to the Hotel under which any tenants
(other than Hotel guests and Operating Lessee) or concessionaires occupy space
in the Hotel.
"Operating Agreements" shall mean all written service, supply,
maintenance, construction, capital improvement and other similar agreements in
effect with respect to HdC (other than the Occupancy Agreements, Operating
Lease, Leased Property Agreements, and the Management Agreement) related to
construction, operation, or maintenance of HdC.
"Operating Lease" shall mean the operating lease by and between
Owner and Operating Lessee dated as of December 18, 2003.
"Operating Lessee" shall mean Hotel del Xxxxxxxx, XX, a Delaware
limited partnership.
"Ordinary Course Contracts" shall mean, collectively, the Occupancy
Agreements, Operating Agreements, and Leased Property Agreements.
"Owner" shall mean CNL Hotel Del Partners, LP, a Delaware limited
partnership.
"Percentage Share" shall mean with respect to each Seller the
percentage set forth opposite such Seller's name on Schedule 2 hereto.
"Person" shall mean an individual, a partnership, a limited
liability company, a corporation, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization, or a Governmental
Authority.
"Personal Property" shall mean the items of tangible personal
property consisting of all furniture, fixtures, equipment, machinery, Inventory
and other tangible personal property of every kind and nature (which does not
include cash, restricted cash, and reserves) located at the Hotel and owned or
leased by Owner (or Operating Lessee), and Intangible Personal Property.
"Purchaser Indemnified Party" shall have the meaning ascribed
thereto in Section 10.4(a).
"Purchaser's Report" shall have the meaning ascribed thereto in
Section 2.2(b)(iii).
"Purchaser's Representative" shall mean KSL II Management
Operations, LLC or such Affiliate thereof as it thereby designates.
"Real Property" shall mean the Land and the Improvements with
respect to HdC.
"Reference Working Capital" shall mean current assets (excluding
cash, restricted cash and reserves, except as otherwise provided in
Section 2.3(b)) minus current
8
liabilities (excluding any distribution payables to Affiliates), in each case
determined in accordance with GAAP and as set forth on Schedule 2.2 hereto.
"Reference Working Capital Amount" shall mean the amount identified
as such on, and otherwise determined in accordance with, Schedule 2.2 hereto.
"Replacement Debt" shall mean, collectively, the Replacement Secured
Debt and the Replacement Revolving Debt.
"Replacement Debt Commitment" shall mean the commitment for the
Replacement Debt to be obtained by SHC pursuant to the terms of the SHC
Agreement, subject to the mutual approval of Purchaser and SHC which may not be
unreasonably withheld so long as such commitment is substantially consistent
with the Replacement Debt criteria set forth on Schedule 4 hereto.
"Replacement Secured Debt" shall mean, collectively, one or more
secured loans to the Acquired Entities which are the current borrowers under the
Existing Debt in the aggregate principal amount of not less than Six Hundred
Million Dollars ($600,000,000).
"Replacement Revolving Debt" shall mean a revolving loan facility to
HdC Parent or such other Acquired Entity as it may designate in the maximum
principal of not less than Ten Million Dollars ($10,000,000), which facility is
intended to replace the revolving loan facility included as part of the Existing
Debt.
"Seller" and "Sellers" shall have the meaning ascribed thereto in
the preamble of this Agreement.
"Seller Indemnified Party" shall have the meaning ascribed thereto
in Section 10.4(c).
"Sellers' Adjusted Imputed Equity Amount" shall mean Sellers'
Unadjusted Imputed Equity Amount as shall be adjusted as provided in Articles
II, and X.
"Sellers' Releasees" shall have the meaning ascribed thereto in
Section 5.9.
"Sellers' Representative" shall mean Xxxxxx Xxxxxxx or such other
individual as Sellers may hereafter designate in writing to Purchaser.
"Sellers' Unadjusted Imputed Equity Amount" shall mean One Hundred
Fifty-One Million Seven Hundred Thousand Four Hundred Ninety Dollars
($151,700,490).
"SHC" shall mean SHC Del Coronado, L.L.C., a Delaware limited
liability company.
"SHC Agreement" shall mean that certain Purchase and Sale Agreement
dated of even date herewith by and between Purchaser, as sellers, and SHC, as
purchaser, pursuant to which SHC has agreed to purchase, and Purchaser has
agreed to sell, the HdC Interests described therein, a copy of which is attached
as Exhibit G hereto.
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"Spa and Beachclub Project" means the spa and beachclub development
currently under construction at the Hotel.
"Subsidiary Entities" (or individually, a "Subsidiary Entity") shall
mean the entities identified as such on Schedule 1 hereto.
"Surviving Claims" shall have the meaning ascribed thereto in
Section 10.3.
"Surviving Covenant" shall have the meaning ascribed thereto in
Section 10.3.
"Surviving Representations" shall have the meaning ascribed thereto
in Section 10.3.
"Tax or Taxes " shall mean any and all taxes, charges, fees, levies
or other assessments, including but not limited to income, gross receipts,
excise, real or personal property, sales, withholding, social security,
retirement, unemployment, occupation, use, goods and services, service use,
license, value added, capital, net worth, payroll, profits, withholding,
franchise, registration, transfer and recording taxes, fees and charges, and any
other taxes, assessment or similar charges whether computed on a separate,
consolidated, unitary, combined or any 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, questionnaire,
declaration or other information or filing required to be supplied to any Taxing
Authority with respect to Taxes, including information returns, any documents
with respect to or accompanying payments of estimated Taxes, any claim or
request for refunds, or any documents with respect to or accompanying requests
for the extension of time in which to file any such report, return, document,
questionnaire, declaration or other information.
"Taxing Authority" shall mean with respect to any Tax, the Internal
Revenue Service or any other Governmental Authority that
imposes such Tax, including any state, county, local, provincial or foreign
government or any subdivision or taxing agency thereof.
"Title Company" shall mean First American Title Insurance Company.
"Uniform System" shall mean the Uniform System of Accounts for
Hotels, 9th Edition, International Association of Hospitality Accountants
(1996).
"Working Capital Closing Statement" shall have the meaning ascribed
thereto in Section 2.2(b)(vi).
"Working Capital Increase" shall have the meaning ascribed thereto
in Section 2.2(b)(viii).
"Working Capital Reduction" shall have the meaning ascribed to such
term in Section 2.2(b)(viii).
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ARTICLE II
PURCHASE AND SALE
2.1 Purchase and Sale. The parties acknowledge and agree that
immediately prior to the purchase of the HdC Interests by Purchaser as
contemplated hereby the Replacement Debt shall be incurred by the Acquired
Entities, the proceeds of which shall be utilized in part to repay in full the
Existing Debt. Any proceeds from the Replacement Debt less the amount utilized
to repay the Existing Debt shall be distributed to the record owners of the HdC
Interests and all remaining equity interests in HdC Parent and North Beach
Developer at such time in accordance with the terms of the HdC Venture
Agreement; provided, however, the proceeds of the Replacement Revolving Debt
shall only be utilized to repay the then outstanding balance of the revolving
loan facility included as part of the Existing Debt, it being understood and
agreed that the undrawn balance of the Replacement Revolving Debt shall
thereafter be utilized post-Closing for HdC working capital and related
purposes. Immediately following such distribution, Purchaser shall purchase the
HdC Interests. The aggregate purchase price for the HdC Interests (the "HdC
Interest Purchase Price") shall be equal to the amount by which Sellers'
Adjusted Imputed Equity Amount exceeds the aggregate principal sum of all
Replacement Secured Debt proceeds disbursed to Sellers at Closing. The parties
acknowledge and agree that it is the intent of the parties hereto that
immediately following Closing Purchaser and its Designees (as defined below)
shall own directly or indirectly 100% of equity interests in the Acquired
Entities in the aggregate, as depicted on Schedule 2.1
2.2 Working Capital Adjustment.
(a) At Closing, Seller's Unadjusted Imputed Equity Amount shall be
increased or decreased, as the case may be, on a dollar-for-dollar basis by 50%
of the amount by which the Estimated Working Capital is greater or less than the
Reference Working Capital Amount.
(b) (i) As soon as practicable (but in any event at least five (5)
days prior to Closing), Purchaser's Representative shall prepare and deliver to
Sellers an estimated calculation as of the Closing, of the Reference Working
Capital (the "Estimated Working Capital"). Such calculation of the Estimated
Working Capital is referred to herein as the "Estimated Working Capital Closing
Statement"). The Estimated Working Capital Closing Statement shall be prepared
in conformity with the definition of Reference Working Capital and Schedule 2.2
hereto; provided, however, the Reference Working Capital shall not be reduced
for any amount which reduces the Purchase Price under Section 2.3.
(ii) As soon as practicable following the Closing, Purchaser's
Representative shall prepare a statement of the Reference Working Capital as of
the Closing Date (the "Draft Working Capital Closing Statement"). The Draft
Working Capital Closing Statement shall be prepared in conformity with the
definition of Reference Working Capital and Schedule 2.2 hereto. Purchaser's
Representative will deliver the Draft Working Capital Closing Statement to the
Sellers not later than sixty (60) days following the Closing Date.
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(iii) The Draft Working Capital Closing Statement shall be final and
binding upon the parties, and shall be deemed to be the Working Capital Closing
Statement, unless, within thirty (30) days after receipt of the Draft Working
Capital Closing Statement from Purchaser's Representative, Sellers shall provide
to the Purchaser's Representative a report indicating its objections, if any, to
the Draft Working Capital Closing Statement. Any such objections shall be set
forth in reasonable detail in a report (the "Purchaser's Report") that shall
indicate the grounds upon which Sellers dispute the Purchaser's Representative's
calculation of the Draft Working Capital Closing Statement. Sellers shall
provide the Purchaser's Representative full access, during normal business
hours, to the books and records of the Acquired Entities and to the Acquired
Entities' personnel and accountants in connection with the Purchaser's
Representative's preparation of the Working Capital Closing Statement and any
other matter under this Section 2.2.
(iv) Within thirty (30) days after the receipt by the Purchaser's
Representative's of the Purchaser's Report, the Purchaser's Representative and
Sellers shall endeavor in good faith to agree on any matters in dispute.
(v) If Sellers and the Purchaser's Representative are unable to
agree on any matters in dispute within thirty (30) days after receipt by
Purchaser of the Purchaser's Report, the matters in dispute (and only such
matters) will be submitted for resolution to an independent accounting firm of
national reputation (other than Sellers' or Purchaser's accounting firms ) as
may be mutually acceptable to Sellers and Purchaser's Representative (and if
such parties cannot agree, by lottery selection of the other acounting firms of
national reputation designated by Sellers) (the "Independent Accounting Firm"),
which Independent Accounting Firm shall, within thirty (30) days after such
submission, determine and issue a written report to the Purchaser's
Representative and Sellers regarding such disputed items and such written
decision shall be final and binding upon the parties. Purchaser's Representative
and Sellers shall cooperate with each other and each other's representatives to
enable the Independent Accounting Firm to render a written decision as promptly
as possible. The fees and disbursements of the Independent Accounting Firm shall
be borne equally by Purchaser, on the one hand, and Sellers, on the other hand,
with one party reimbursing the other, if necessary, following such
determination.
(vi) The working capital statement incorporating the resolution of
matters in dispute with respect to Reference Working Capital (or, if a
Purchaser's Report is not provided within the time prescribed in Section
2.2(b)(ii), the Draft Working Capital Closing Statement) is referred to as the
"Working Capital Closing Statement." The Working Capital Closing Statement shall
have the legal effect of an arbitral award and shall be final, binding and
conclusive on the Parties.
(vii) In acting under this Agreement, the Independent Accounting
Firm shall be entitled to the privileges and immunities of arbitrators.
(viii) If the value of the Reference Working Capital calculated by
reference to the Working Capital Closing Statement (the "Closing Working
Capital") is less than an amount equal to the value of the Reference Working
Capital calculated by reference to the Estimated Working Capital Closing
Statement, the Unadjusted Gross Purchase Price shall be
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reduced by an amount equal to such shortfall (the "Working Capital Reduction").
Subject to Section 2.2(b)(x), Sellers, severally and not jointly, pro rata in
proportion to their Percentage Share, shall pay to Purchaser the amount of the
Working Capital Reduction. If the value of the Reference Working Capital
calculated by reference to the Working Capital Closing Statement (the "Closing
Working Capital") is greater than an amount equal to the value of the Reference
Working Capital calculated by reference to the Estimated Working Capital Closing
Statement, the Unadjusted Gross Purchase Price shall be increased by an amount
equal to such excess (the "Working Capital Increase"). Subject to Section
2.2(b)(x), Purchaser shall pay to Sellers the amount of the Working Capital
Increase.
(ix) Any payments to be made pursuant to Section 2.2(b)(viii) shall
be made in cash within ten (10) days after the date of receipt by Purchaser and
Sellers' Representative of the Working Capital Closing Statement as finally
established pursuant to this Section 2.2(b).
(x) Any amount payable under Section 2.2(b)(viii) by Purchaser
shall be equal to 50% of the Working Capital Increase. Any amount payable by
Sellers pursuant to this Section 2.2 shall be equal to 50% of the Working
Capital Reduction, which amount shall be paid by Sellers (pro rata in accordance
to their Percentage Share).
2.3 Other Closing Adjustments; Cash; Transaction Expenses.
(a) At the Closing, and in addition to the adjustments
contemplated by Section 2.2, Sellers' Unadjusted Imputed Equity Amount shall be
increased by 50% of the value of the existing Libor cap heretofore obtained by
the parties pursuant to the Existing Loan Documents and the North Beach and Spa
and Beachclub Capex Amount as certified to Sellers and Purchaser by KSL DC
Development Management, LLC at Closing (the "North Beach and Spa and Beachclub
Capex Certification").
(b) The parties acknowledge and agree that Sellers and/or HdC
Parent may at any time prior to Closing cause the Acquired Entities to
distribute all or any portion of the cash, restricted cash or reserves held by
any of them to such Acquired Entities' constituent members, partners or
shareholders (as the case may be); provided, however, if and to the extent such
amounts are not distributed prior to Closing, such undistributed amounts shall
be added to and reflected on the Working Capital Closing Statement as an
increase in Reference Working Capital.
(c) The parties acknowledge that all costs and fees incurred in
connection with the Replacement Debt and North Beach Loan (if applicable) shall
be paid by the Acquired Entities immediately following Closing and shall in no
event be a liability or obligation os Sellers. The parties further agree that
the fees owing to Sellers' advisor, Xxxxxxx Xxxxx & Co., and all Common
Transaction Costs and shall be paid 50% by Purchaser and 50% by Sellers (pro
rata based upon their Percentage Share).
2.4 Purchase Price Allocation. Purchaser and Sellers agree to
negotiate in good faith, for each transferred HdC Interest, the portion of the
HdC Interest Purchase Price allocable thereto (with respect to such transferred
HdC Interest, the "Allocated HdC Interest
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Unadjusted Price"), prior to the Termination Time (as defined in the SCH
Agreement). Upon such agreement, such allocation shall be attached to this
Agreement as Schedule 2.4. Purchaser, Sellers and each of their Affiliates,
shall file all Tax Returns, consistent with the Allocated HdC Interest
Unadjusted Price for each transferred HdC Interest adjusted to take into account
the applicable Seller's Percentage Share of purchase price adjustments
contemplated by this Articles II, IX, and X (as so adjusted, the "Allocated HdC
Interest Adjusted Price").
2.5 Designees.
(a) At the Closing, subject to the terms and conditions of this
Agreement, at the direction of Purchaser, the Sellers will sell, transfer,
convey, assign and deliver to one or more third parties designated by Purchaser
pursuant to the SHC Agreement (individually a "Designee" and collectively, the
"Designees") all or any part of the HdC Interests, as specified in writing by
Purchaser to Sellers at least three (3) Business Days prior to the Closing. At
the Closing, each Designee shall acknowledge to Sellers in writing that except
as otherwise provided in Section 10.1(a), (i) Designee has no contractual or
legal rights under and is not an intended or incidental beneficiary of this
Agreement; (ii) such conveyance or creates no privity between Designee and
Sellers; (iii) Designee has and will have no legal or equitable recourse to
Sellers in respect of any claim or other matter whatsoever arising from or in
connection with the transactions by which it acquires any of the HdC Interests
and Sellers make no representations or warranties of any nature whatsoever to or
for the benefit of Designee; and (iv) Designee will direct and pursue any and
all claims and assert any rights whatsoever arising from such transactions
solely against Purchaser, and not against Sellers. Notwithstanding the
foregoing, any payment received by Sellers from a Designee shall be deemed made
by and on behalf of such Designee.
(b) Sellers have made certain representations, warranties and
covenants to, and have agreed to certain indemnification of, Purchaser in this
Agreement, and Sellers agree that Purchaser shall in all events have the right
to rely upon Sellers' representations and agreement to indemnify in making its
own representations, warranties, covenants and indemnifications to a Designee
(including, without limitation, SHC or any Affiliate thereof), but with the
understanding that no Designee, nor SHC or its Affiliates, shall be deemed a
third party beneficiary of Sellers' representations, warranties, covenants and
indemnifications hereunder except as otherwise expressly provided in Section
10.1(a). To the extent that any breach by Purchaser of a representation,
warranty or covenant that it makes to a Designee is caused by the inaccuracy,
untruth or unfulfillment of the Sellers' representations, warranties or
covenants (a "Breach"), Purchaser shall have the following rights and remedies:
(i) to bring against Sellers a claim for indemnification and
institute litigation to enforce such claim, to the same extent as made by the
Designee against Purchaser (to the full extent permitted in, and subject to the
limitations of, this Agreement) (a "Mirror Claim"); and
(ii) to seek as damages in the Mirror Claim, all Losses of
the Designee arising from the Mirror Claim (to the full extent permitted in, and
subject to the limitations of, this Agreement and the SHC Agreement).
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Sellers acknowledge and agree that any Mirror Claims are subject to
indemnification as provided herein by Sellers to Purchaser and except as
otherwise expressly provided herein Sellers waive any defense based upon any
claim that Purchaser has not suffered Losses or does not have the requisite
standing to institute against the Seller any claim underlying the Mirror Claim.
2.6 SHC Deposit. Sellers and Purchaser agree that if the transaction
contemplated by the SHC Agreement is terminated prior to its consummation, and
SHC forfeits all or any portion of the Deposit (as defined in the SHC Agreement)
in connection with such termination, the Sellers, on the one hand, and
Purchaser, on the other hand, shall each be entitled to one half of such Deposit
actually received by Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers jointly and severally hereby represent and warrant to Purchaser as
follows:
3.1 Organization and Power. Each Seller is duly organized, validly
existing and in good standing under the laws of the state of its organization.
Each Seller has all requisite partnership or limited liability company power and
authority, as the case may be, to enter into and perform its obligations
hereunder and under any document or instrument required to be executed and
delivered on behalf of each such Seller hereunder.
3.2 Authorization and Execution. This Agreement and the other agreements
contemplated hereby have been duly authorized by all necessary action on the
part of each Seller, have been duly executed and delivered by each such Seller,
in each case to the extent a party thereto, and constitutes the valid and
binding agreement of each such Seller and is enforceable in accordance with its
terms against such Seller, subject to equitable principles and to applicable
bankruptcy, insolvency, fraudulent conveyance and other similar Laws generally
applicable to the rights of creditors. The persons executing this Agreement on
behalf of each Seller have the authority to do so.
3.3 Ownership of HdC Interests.
(a) The HdC Interests have been duly authorized and validly
issued, and are fully paid and non-assessable (except in the case of
non-corporate entities, to the extent otherwise provided under Delaware law).
The HdC Interests are owned both legally and beneficially by each Seller as set
forth on Schedule 2 hereto, in each case, free and clear of any and all Liens
(except the Existing Debt Liens), and are not subject to any contract (other
than this Agreement, the Existing Debt Liens, or the Acquired Entity
Organizational Documents) under which any such Liens could reasonably be
expected to arise. Subject to the satisfaction of all applicable conditions
precedent to Closing hereunder set forth in Section 6.2, there are no
outstanding interests, securities, rights, subscriptions, warrants, options,
agreements, or contracts that give any Person the right to purchase or otherwise
receive or be issued all or any portion of the HdC Interests other than this
Agreement and the Acquired Entity Organizational Documents.
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(b) The HdC Interests represent the type and amount of direct or
indirect percentage partnership, membership or stock interest in each Acquired
Entity set forth on Schedule 2 hereto. Subject to the satisfaction of all
applicable conditions precedent to Closing hereunder set forth in Section 6.2,
there are no outstanding interests, securities, rights, subscriptions, warrants,
options, agreements, or contracts that give any Person the right to purchase or
otherwise receive or be issued any legal or beneficial ownership in any Acquired
Entity, other than this Agreement, the Acquired Entity Organizational Documents
and the SHC Agreement.
3.4 Seller Non-Contravention. Subject to the satisfaction of all
conditions precedent to Closing hereunder set forth in Section 6.2, the
execution and delivery of, and the performance by each Seller of its respective
obligations under, this Agreement do not and will not contravene, or constitute
a default under, (i) its partnership agreement, limited liability company
agreement or other organizational documents, (ii) any material agreement
(subject to obtaining any required consents under the Ordinary Course
Contracts), or (iii) any judgment, injunction, order, decree or other material
instrument to which it is a party or otherwise binding upon it or result in the
creation of any Lien on any asset of such Seller. No consent or approval of any
Person is required for the execution, delivery and performance by each Seller of
this Agreement other than such consents as are required under Authorizations,
rules and regulations of liquor license authorities, Ordinary Course Contracts
and the North Beach Loan Documents.
3.5 Insurance. To Sellers' knowledge, all of the Insurance Policies are
valid and in full force and effect and no Acquired Entity has received any
written notice that any Acquired Entity or any other person has failed to comply
with any material requirements thereof which failure has not been remedied.
3.6 Bankruptcy. No Seller is subject to any pending, or to the knowledge
of Sellers, threatened bankruptcy proceeding, receivership proceeding or other
insolvency, dissolution, reorganization or similar proceeding.
3.7 Seller Is Not a "Foreign Person". No Seller is a "foreign person"
within the meaning of Section 1445 of the Code.
3.8 Financial Statements. To Sellers' knowledge, the Financial
Statements present fairly the financial position of the Acquired Entities which
own and control HdC, as of the date thereof and the results of operations and
cash flows of HdC for the periods set forth therein in all material respects. To
the extent not reflected in the Financial Statements and other than a general
partner's or member's liability for the liabilities of a partnership or limited
liability company, respectively, the Acquired Entities (other than Owner,
Operating Lessee, Manager, and North Beach Developer) have no liabilities other
than (i) equity interests or management interests in a Subsidiary Entity, Owner
or Operating Lessee, (ii) the Existing Debt and liabilities pursuant to a
Monetary Title Encumbrance which will be released or discharged as Closing, and
(iii) liabilities created by Purchaser or its Affiliates in breach of the HdC
Venture Agreement and/or the Management Agreement without Sellers' knowledge.
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3.9 Special Purpose Entities. To Seller's knowledge, other than through
the actions of Purchaser and its Affiliates or Manager taken in breach of the
HdC Venture Agreement and/or the Management Agreement, since its formation, each
Acquired Entity (i) has not owned, managed or leased any asset or property other
than a direct or indirect interest in HdC and incidental personal property
necessary for the direct or indirect ownership, lease, management and operation
of HdC, (ii) has not engaged in any business other than the direct or indirect
ownership, lease, development, management and operation of HdC, and (iii) has no
existing liabilities except those arising from or through the direct or indirect
ownership, lease, management or operation of HdC and the Existing Debt.
3.10 Tax Matters.
(a) Except as set forth on Schedule 3.10, (i) each Acquired Entity
which is not a corporation qualifies, and has qualified during its entire
existence, as a partnership for federal income tax purposes, and not as a
corporation, or an association taxable as a corporation; (ii) each Acquired
Entity has filed within the time and in the manner prescribed by law all
federal, state and local Tax Returns and reports, required to be filed by it
under the Laws of the United States and of each state or other jurisdiction in
which such Acquired Entity conducts business activities requiring the filing of
Tax Returns or reports; (iii) all Tax Returns filed by such Acquired Entity are
true and correct in all material respects; (iv) no Acquired Entity is delinquent
in the payment of any Tax, assessment, or governmental charge or deposit and has
no Tax deficiency or claim outstanding, assessed, or threatened in writing
against it; (v) the charges, accruals, and reserves for unpaid Taxes on the
books and records of each Acquired Entity as of the Closing Date are sufficient
in all material respects for the payment of all unpaid federal state and local
Taxes of such Acquired Entity accrued for or applicable to all periods ended on
or before the Closing Date; (vi) there are no Tax Liens outstanding against any
Acquired Entity or any of their respective assets; and (vii) the federal, state,
and local Tax Returns of such Acquired Entity have not been audited, nor has
such entity received, as of the Effective Date, any notice of any federal,
state, or local audit.
(b) No Acquired Entity other than CNL Hotel Del Tenant Corp. has
been or has elected (or will elect prior to the Closing) to be treated as an
association taxable as a corporation for federal income tax purposes under
Treasury Regulations Section 301.7701-3.
3.11 Brokers. Other than Xxxxxxx, Xxxxx & Co., the fees and expenses of
which shall be paid as provided in Section 2.3, no Seller has retained any
broker for the transactions contemplated hereby for which Purchaser shall have
any responsibility.
Each of the representations and warranties contained in this Article III
are intended for the benefit of Purchaser and may be waived in whole or in part,
in writing, by Purchaser. Each of the representations and warranties contained
in this Article III shall be deemed made as of the Effective Date, and remade as
of the Closing Date to the extent provided in Section 8.2(d) , and any claim for
any breach of such representations and warranties shall survive Closing only as
provided in Article X.
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The term "to the knowledge of Seller" or similar phrase as used in this
Article III with respect to any Seller shall mean the then actual knowledge of
Xxxxxx Xxxxxxx and Xxxxx Xxxxxxxxxx, neither of whom shall have a duty of
investigation or inquiry.
ARTICLE IV
[INTENTIONALLY OMITTED]
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
To induce Sellers to enter into this Agreement and to consummate the
transactions contemplated hereby, each Purchaser, jointly and severally,
represents and warrants to Sellers on the Effective Date, as follows:
5.1 Organization and Power. Such Purchaser is duly organized, validly
existing and in good standing under the laws of the state of its organization
and has all requisite power and authority to enter into and perform its
obligations under this Agreement and any document or instrument required to be
executed and delivered on behalf of such Purchaser hereunder.
5.2 Authorization and Execution. This Agreement and the other
agreements contemplated hereby have been duly authorized by all necessary action
on the part of such Purchaser, has been duly executed and delivered by such
Purchaser, constitutes the valid and binding agreements of such Purchaser and
are enforceable against such Purchaser in accordance with their terms, subject
to equitable principles and to applicable bankruptcy, insolvency, fraudulent
conveyance and other similar laws generally applicable to the rights of
creditors. The person executing this Agreement on behalf of such Purchaser has
the authority to do so.
5.3 Non-contravention. The execution and delivery of this Agreement and
the other agreements contemplated hereby and the performance by such Purchaser
of its obligations hereunder do not and will not contravene, or constitute a
default under, any provisions of Applicable Law, such Purchaser's organizational
documents, or any agreement, judgment, injunction, order, decree or other
instrument binding upon such Purchaser or result in the creation of any Lien on
any asset of such Purchaser.
5.4 Litigation. There is no action, suit or proceeding, pending or known
to be threatened, against or affecting such Purchaser in any court or before any
arbitrator or before any Governmental Authority which (i) in any manner raises
any question affecting the validity or enforceability of this Agreement or any
other agreement or instrument to which such Purchaser is a party or by which it
is bound and that is to be used in connection with, or is contemplated by, this
Agreement, (ii) would materially and adversely affect the business, financial
position or results of operations of such Purchaser, or (iii) would materially
and adversely affect the ability of such Purchaser to perform its obligations
hereunder, or under any document to be delivered pursuant hereto.
5.5 Brokers. With the exception of Xxxxxxx Sachs & Co. the fees and
expenses of which will be paid as provided in Section 2.3, Purchaser has not
retained any broker in
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connection with the transactions contemplated hereby for which any Seller shall
have any responsibility following Closing.
5.6 LIMITATION ON SELLERS' REPRESENTATIONS AND WARRANTIES. PURCHASER
HEREBY ACKNOWLEDGES AND AGREES THAT IT HAS EXAMINED AND INVESTIGATED TO ITS FULL
SATISFACTION ALL FACTS, CIRCUMSTANCES AND MATTERS RELATING TO THE HdC INTERESTS,
HdC AND THE ACQUIRED ENTITIES. PURCHASER EXPRESSLY ACKNOWLEDGES AND AGREES THAT,
EXCEPT AS EXPRESSLY SET FORTH IN ARTICLE III, PURCHASER IS NOT RELYING ON ANY
REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, WHETHER ORAL OR WRITTEN,
EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, FROM ANY SELLER, ACQUIRED ENTITY,
NOR ANY PARTNER, MEMBER, OFFICER, DIRECTOR, EMPLOYEE, ATTORNEY OR AGENT THEREOF,
AS TO ANY MATTER, CONCERNING THE HdC INTERESTS, HdC AND THE ACQUIRED ENTITIES,
INCLUDING WITHOUT LIMITATION: (I) THE QUALITY, NATURE, HABITABILITY,
MERCHANTABILITY, USE, OPERATION, VALUE, MARKETABILITY, ADEQUACY OR PHYSICAL
CONDITION OF HdC OR ANY ASPECT OR PORTION THEREOF, INCLUDING STRUCTURAL
ELEMENTS, FOUNDATION, ROOF, APPURTENANCES, ACCESS, LANDSCAPING, PARKING
FACILITIES, ELECTRICAL, MECHANICAL, HVAC, PLUMBING, SEWAGE, AND UTILITY SYSTEMS,
FACILITIES AND APPLIANCES, SOILS, GEOLOGY, SEISMIC AND GROUNDWATER, OR WHETHER
HdC LIES WITHIN A SPECIAL FLOOD HAZARD AREA, AN AREA OF POTENTIAL FLOODING, A
VERY HIGH FIRE HAZARD SEVERITY ZONE, A WILDLAND FIRE AREA, AN EARTHQUAKE FAULT
ZONE OR A SEISMIC HAZARD ZONE, AND/OR WHETHER AND TO WHAT EXTENT ANY OF SUCH
RISKS OR ANY OTHER RISKS OR LOSSES RESULTING THEREFROM ARE OR MAY CONTINUE TO BE
INSURABLE, (II) THE DIMENSIONS OR LOT SIZE OF THE REAL PROPERTY OR THE SQUARE
FOOTAGE OF THE IMPROVEMENTS THEREON OR OF ANY TENANT SPACE THEREIN, (III) THE
DEVELOPMENT OR INCOME POTENTIAL, OR RIGHTS OF OR RELATING TO, HdC, OR HdC'S USE,
HABITABILITY, MERCHANTABILITY, OR FITNESS, OR THE SUITABILITY, VALUE OR ADEQUACY
OF HdC FOR ANY PARTICULAR PURPOSE, (IV) THE ZONING, HISTORICAL LANDMARK OR OTHER
LEGAL STATUS OF HdC OR ANY OTHER PUBLIC OR PRIVATE RESTRICTIONS ON THE USE OF
HdC, (V) THE COMPLIANCE OF HdC OR ITS OPERATION WITH ANY APPLICABLE LAWS OR
RESTRICTIONS OR OF ANY OTHER PERSON, (VI) THE ABILITY OF PURCHASER TO OBTAIN ANY
NECESSARY CONSENTS OR APPROVALS FROM ANY GOVERNMENTAL AUTHORITIES FOR
PURCHASER'S INTENDED USE OR DEVELOPMENT OF HdC, (VII) THE PRESENCE OR ABSENCE OF
HAZARDOUS MATERIALS ON, IN, UNDER, ABOVE OR ABOUT HdC OR ANY ADJOINING OR
NEIGHBORING PROPERTY, (VIII) THE QUALITY OF ANY LABOR AND MATERIALS USED IN ANY
PORTION OF HdC, (IX) THE CONDITION OF TITLE TO HdC, (X) THE ORDINARY COURSE
CONTRACTS, THE DEVELOPMENT AGREEMENT, THE COLLECTIVE BARGAINING AGREEMENT OR ANY
OTHER AGREEMENTS AFFECTING HdC OR THE INTENTIONS OF ANY PARTY WITH RESPECT TO
THE NEGOTIATION AND/OR EXECUTION OF ANY LEASE OR CONTRACT WITH RESPECT TO HdC,
OR (XI) THE ECONOMICS OF, OR THE
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INCOME AND EXPENSES, REVENUE OR EXPENSE PROJECTIONS OR OTHER FINANCIAL MATTERS,
RELATING TO, THE OPERATION OF THE OWNERSHIP OF HdC OR ANY PORTION THEREOF.
ANY REPORTS, REPAIRS OR WORK REQUIRED BY PURCHASER ARE THE SOLE
RESPONSIBILITY OF PURCHASER. PURCHASER AGREES THAT THERE IS NO OBLIGATION ON THE
PART OF ANY SELLER OR ACQUIRED ENTITY TO MAKE ANY CHANGES, ALTERATIONS OR
REPAIRS TO HdC OR TO CURE ANY VIOLATIONS OF APPLICABLE LAW OR TO COMPLY WITH THE
REQUIREMENTS OF ANY INSURER.
5.7 RELEASE. AS A MATERIAL PART OF THE CONSIDERATION TO SELLERS FOR THE
SALE OF THE HdC INTERESTS HEREUNDER, EXCEPT FOR A SURVIVING CLAIM MADE UNDER
ARTICLE X, PURCHASER HEREBY WAIVES AND RELINQUISHES, AND RELEASES SELLERS AND
EACH OF SELLERS' PARTNERS, MEMBERS, OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS
AND AGENTS (COLLECTIVELY, "SELLER RELEASEES") FROM, ANY AND ALL CLAIMS AND
REMEDIES (INCLUDING, WITHOUT LIMITATION, ANY RIGHT OF RESCISSION) AGAINST SELLER
RELEASEES, OR ANY OF THEM, BASED DIRECTLY OR INDIRECTLY ON (I) ANY PAST, PRESENT
OR FUTURE CONDITION OF HdC, INCLUDING, WITHOUT LIMITATION, THE RELEASE OR
PRESENCE OF ANY HAZARDOUS MATERIALS OR (II) ANY MISREPRESENTATION, OR FAILURE TO
DISCLOSE TO PURCHASER ANY INFORMATION, REGARDING HdC (INCLUDING, WITHOUT
LIMITATION, ANY DEFECTIVE, HAZARDOUS OR UNLAWFUL CONDITION OF WHICH SELLERS
SHOULD BE AWARE, WHETHER OR NOT SUCH CONDITION REASONABLY COULD HAVE BEEN
DISCOVERED BY PURCHASER THROUGH AN INSPECTION OF HdC OR THE REAL PROPERTY
RECORDS). PURCHASER UNDERSTANDS THAT SUCH WAIVER AND RELEASE INCLUDES STATUTORY
AS WELL AS "COMMON LAW" AND EQUITABLE RIGHTS AND REMEDIES AND THAT IT COVERS
POTENTIAL CLAIMS OF WHICH PURCHASER MAY BE CURRENTLY UNAWARE OR UNABLE TO
DISCOVER. PURCHASER ACKNOWLEDGES THAT THE FOREGOING WAIVER AND RELEASE IS OF
MATERIAL CONSIDERATION TO SELLERS IN ENTERING INTO THIS AGREEMENT, THAT
PURCHASER'S COUNSEL HAS ADVISED PURCHASER OF THE POSSIBLE LEGAL CONSEQUENCES OF
MAKING SUCH WAIVER AND RELEASE AND THAT PURCHASER HAS TAKEN INTO ACCOUNT, IN
AGREEING TO PURCHASE THE HdC INTERESTS FOR THE PURCHASE PRICE SPECIFIED HEREIN,
SELLERS' DISCLAIMER OF ANY WARRANTIES AND REPRESENTATIONS REGARDING THE HdC
INTERESTS, HdC AND THE ACQUIRED ENTITIES OTHER THAN THOSE EXPRESSLY SET FORTH
HEREIN.
PURCHASER FURTHER AGREES AND ACKNOWLEDGES THAT, IN GIVING THE FOREGOING
WAIVER AND RELEASE, IT HAS WITH ITS LEGAL COUNSEL, CONSIDERED ANY STATUTE OR
OTHER LAW THAT MIGHT APPLY TO AND LIMIT THE EFFECT OF PURCHASER'S WAIVER AND
RELEASE HEREIN AND HEREBY KNOWINGLY WAIVES THE BENEFITS OF ANY SUCH LAW
INCLUDING,
20
WITHOUT LIMITATION, THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH
PROVIDES AS FOLLOWS:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR EXPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF KNOWN TO HIM MUST HAVE MATERIALLY AFFECTED THE
SETTLEMENT WITH THE DEBTOR."
_______________________________ _______________________________________
Purchaser's Initials Sellers' Initials
ARTICLE VI
CONDITIONS PRECEDENT
6.1 As to Purchaser's Obligations. The obligation of Purchaser to
consummate the transactions contemplated hereunder at Closing is subject to the
satisfaction of the following conditions precedent (unless the failure to
satisfy such condition is caused by the default of Purchaser under this
Agreement):
(a) Sellers' Deliveries. Each Seller shall have delivered to
Escrow Agent all of the documents required of such Seller pursuant to Section
8.2 and 8.4 on or before the dates required in Section 8.2 and 8.4.
(b) Representations, Warranties and Covenants; Obligations of
Sellers. The representations and warranties made in this Agreement by Sellers
shall be true and correct in all material respects, in each case as of the
Closing Date to the extent provided in Section 8.2(d) (unless by their terms
they relate to an earlier date, in which case such representations shall be true
and correct in all material respects as of such earlier date); and Sellers shall
have performed in all material respects all of their respective covenants and
other obligations under this Agreement.
(c) Replacement Debt. The closing for the Replacement Debt
pursuant to the Replacement Debt Commitment shall have occurred immediately
prior to or concurrently with the Closing and the proceeds thereof shall have
been (i) applied to the repayment of the Existing Debt and release of the
Existing Debt Liens as provided in Section 2.1, and (ii) distributed as provided
in Section 2.1. Purchaser acknowledges that the SHC Agreement obligates
Purchaser and SHC to use diligent commercially reasonable efforts to obtain and
close the Replacement Debt.
(d) Resignations. Purchaser shall have received the written
resignation of all of the directors, managers and officers of the Acquired
Entities appointed by or otherwise affiliated with Sellers, effective as of the
Closing Date.
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(e) SHC Agreement. Closing under SHC Agreement with respect to the
transactions contemplated thereby shall have occurred simultaneously with the
Closing hereunder. Purchaser acknowledges that the SHC Agreement obligates
Purchaser and SHC to use diligent commercially reasonable good faith efforts to
cause the conditions precedent to their respective obligations under the SHC
Agreement to be fully satisfied, performed and discharged on and as of the
Closing Date. Purchaser agrees to apprise Sellers of the status of the
conditions precedent on a weekly basis so long as this Agreement is in effect
Each of the conditions contained in this Section are intended for the
benefit of Purchaser and may be waived in whole or in part, in writing, by
Purchaser or by Purchaser Closing the transactions contemplated by this
Agreement. The exclusive rights and remedies of Purchaser resulting from a
failure of any condition contained in this Section 6.1 are set forth in Section
6.4.
6.2 As to Sellers' Obligations. The obligation of each Seller to
consummate the transactions contemplated hereunder at Closing is subject to the
satisfaction of the following conditions precedent (unless the failure to
satisfy such condition is caused by the default of Sellers under this
Agreement):
(a) Purchaser's Deliveries. Purchaser shall have delivered to
Escrow Agent the Purchase Price and all of the documents required of Purchaser
pursuant to Section 8.3 and 8.4 on or before the dates required in Section 8.3
and 8.4.
(b) Representations, Warranties and Covenants; Obligations of
Purchaser. The representations and warranties by Purchaser made in this
Agreement shall be true and correct in all material respects as of the Closing
Date as if then made; and Purchaser shall have performed in all material
respects all of its covenants and other obligations under this Agreement.
(c) Replacement Debt. The Replacement Debt shall have been
obtained for the applicable Acquired Entities immediately prior to or
concurrently with the Closing and the proceeds thereof shall have been (i)
applied to repayment of the Existing Debt and release of the Existing Debt Liens
as provided in Section 2.1, and (ii) distributed as provided in Section 2.1.
(d) SHC Agreement. Closing under the SHC Agreement with respect to
the transactions contemplated thereby shall have occurred simultaneously with
the Closing hereunder.
Each of the conditions contained in this Section are intended for the
benefit of Sellers may be waived in whole or in part, in writing, by Sellers, or
by Sellers Closing the transactions contemplated by this Agreement. The
exclusive rights and remedies of Sellers resulting from a failure of any
condition contained in this Section 6.2 are set forth in Section 6.4.
6.3 Efforts of the Parties. The parties hereto hereby agree to use
diligent commercially reasonable good faith efforts to cause each of the
conditions precedent to the obligations of the parties to be fully satisfied,
performed and discharged, on and as of the Closing Date (to the extent within
such party's control or ability to influence).
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Notwithstanding anything contained herein to the contrary, Purchaser
acknowledges the importance to Sellers of their relationships with the lenders
under the Existing Debt and, accordingly, shall submit to Sellers'
Representative for pre-approval all material correspondence or other
communications with such lenders pertaining to repayment of such Existing Debt..
6.4 Failure of Conditions.
(a) If the conditions set forth in Section 6.1 cannot or will not
be satisfied on or prior to the Closing Date (unless the failure to satisfy such
condition is caused by the default of Purchaser or its Affiliates under this
Agreement), the provisions of Section 10.1 shall govern.
(b) If the conditions set forth in Section 6.2 cannot or will not
be satisfied on or prior to the Closing Date (unless the failure to satisfy such
condition is caused by the default of Sellers or its Affiliates under this
Agreement), the provisions of Section 10.2 shall govern.
6.5 Waiver by Purchaser. If Purchaser, with knowledge of (i) a default
in any of the covenants, agreements or obligations to be performed by any Seller
under this Agreement and/or (ii) any breach of or inaccuracy in any
representation or warranty of any Seller made in this Agreement, nonetheless
elects to proceed to Closing, then, upon the consummation of the Closing and
notwithstanding anything contained herein to the contrary, Purchaser shall be
deemed to have waived any such default and/or breach or inaccuracy and shall
have no claim against any Seller with respect thereto.
ARTICLE VII
COVENANTS OF SELLERS AND PURCHASER
Sellers, jointly and severally, shall, and shall cause the Acquired
Entities to, comply with their respective covenants set forth below; and
Purchaser, jointly and severally, shall comply with the covenants of Purchaser
set forth below.
7.1 Intercompany Debt. Each Seller covenants that at Closing there shall
be no Intercompany Debt owed by any Acquired Entity to such Seller or its
Affiliates (other than an Acquired Entity).
7.2 Ordinary Course Contracts; Other Agreements. No Acquired Entity
shall cancel, modify or enter into any new Ordinary Course Contracts, except as
required in Owner's, Operating Lessee's, or North Beach Developer's good faith
judgment by the terms thereof, unless (a) any such new agreement or modification
will not bind Purchaser, an Acquired Entity or HdC after the date of Closing
(other than as contemplated by the North Beach Loan), or (b) any cancellation of
any Ordinary Course Contract is the result of a default or failure to perform
adequately by the other party thereto, or (c) any such new agreement would
constitute an Immaterial Contract, or any such modification is made to an
Immaterial Contract and after giving effect to such modification such agreement
will continue to constitute an Immaterial Contract, or (d) Sellers have obtained
Purchaser's prior written consent to such cancellation, new agreement or
modification, which consent shall not be
23
unreasonably withheld or delayed and shall be deemed given if, within five (5)
Business Days following Purchaser's receipt of Sellers' request, Purchaser fails
to provide Owner with a reasonably detailed written description of the reason
Purchaser withholds its consent and/or a statement of those changes (if
applicable), which, if made, would cause Purchaser to grant its consent (the
"Approval Standard"). No Acquired Entity shall cancel or materially modify the
Development Agreement or the Collective Bargaining Agreement except as required
by Applicable Law.
7.3 Insurance. Sellers will not prevent the Acquired Entities from
paying all premiums on, and not cancel or voluntarily allow to expire, any of
the Acquired Entities' Insurance Policies unless such policy is replaced,
without any lapse of coverage, by another policy or policies providing coverage
(but only to the extent deemed commercially reasonable by the Acquired Entities
in good faith) at least as extensive as the policy or policies being replaced.
7.4 Operation of HdC Prior to Closing. Sellers covenant and agree with
Purchaser that between the Effective Date and the Closing Date :
(a) Subject to the restrictions contained herein, as well as
seasonal differences and events beyond Owner's and Operating Lessee's reasonable
control: Sellers shall not prevent Owner, Operating Lessee or Manager (to the
extent such matters are within the scope of Manager's duties under the
Management Agreement), from operating and maintaining the Hotel in substantially
the same manner in which it has been operated and maintained by such parties
prior to the Effective Date and to continue to make capital improvements to the
Hotel in the ordinary course consistent with past practices of Owner and
Operating Lessee. Sellers shall cause Owner and Operating Lessee to conduct no
business other than the ownership, lease, management and operation of the Hotel.
(b) Subject to seasonal differences and events beyond Owner's and
Operating Lessee's reasonable control: Sellers shall not prevent Owner,
Operating Lessee or Manager (to the extent such matters are within the scope of
Manager's duties under the Management Agreement) from continuing to take, guest
room reservations and to book functions and meetings and otherwise to promote
the business of the Hotel in generally the same manner as such parties have done
prior to the Effective Date; has to prevent Advance Bookings from being booked
at rates, prices and charges customarily charged by Owner or Operating Lessee or
Manager, as applicable, for such purposes in the ordinary course of business of
the Hotel consistent with past practices of Owner and Operating Lessee.
(c) Subject to the respective rights of Owner (or Operating
Lessee) and Manager under the Management Agreement, Sellers shall cause Owner
and Operating Lessee to refrain from removing or causing or permitting to be
removed from the Hotel, and shall not cause Manager to remove from the Hotel,
any part or portion of the Improvements or the Personal Property owned by Owner
or Operating Lessee, as applicable, other than in the normal course of business
consistent with past practices, without the prior written consent of Purchaser,
which consent shall be subject to the Approval Standard, unless the same is no
longer needed or useful or the same is replaced, prior to Closing, with similar
items of at least
24
equal suitability, quality and value, free and clear of any Liens, except the
Existing Debt Liens and Monetary Title Encumbrances to be released at Closing.
(d) Sellers not permit any Acquired Entity to acquire or agree to
acquire, any material assets, in each case except in the ordinary course of
business consistent with past practice of Owner and Operating Lessee or as
contemplated by the North Beach Plan and Budget.
(e) Sellers shall not permit HdC Parent to enter into any
employment agreements or amend any such agreements, except (i) as required to
comply with changes in Applicable Law or (ii) in the ordinary course of business
consistent with past practice.
(f) Sellers shall not permit any Acquired Entity to take any
action with respect to, or make any material change in its accounting or Tax
policies or procedures, except as may be required by changes in GAAP
consistently applied upon the advice of its independent accountants.
(g) Sellers shall not permit any Acquired Entity to make or revoke
any Tax election or settle or compromise any Tax liability, or amend any Tax
Return.
7.5 HdC Interests. Except as contemplated by Section 7.16 of the SHC
Agreement or to the extent necessary to accomplish the contribution of real
property for the North Beach Project, Sellers shall not permit (i) any amendment
or change to organizational documents of any Acquired Entity; or (ii) permit any
such Acquired Entity to issue any equity interests of any kind or transfer any
equity interests in any manner whatsoever or any transfer or encumbrance of any
HdC Interest owned by any Seller.
7.6 Reasonable Inspection. After Closing, Purchaser shall afford Sellers
and their agents and representatives reasonable access to its books of account,
financial and other records, information, employees and auditors to the extent
such items and contact with such Persons relate solely to HdC prior to the
Closing , including relating to the working capital adjustment contemplated in
Section 2.2, and to the extent necessary in connection with any audit or any
other reasonable business purpose relating to HdC (other than litigation or
investigation of any claim or action by Sellers against Purchaser or its
Affiliates, and other than materials subject to the attorney-client privilege);
provided that: (i) any such access by Sellers shall not unreasonably interfere
with the conduct of Purchaser's or its manager's business; and (ii) Sellers
shall exercise commercially reasonable efforts to keep and shall cause their
respective agents and representatives to keep the information contained in such
records confidential.
7.7 Replacement Debt. Sellers shall reasonably cooperate with
Purchaser's efforts to obtain the Replacement Debt at no cost or liability to
Seller. In this connection, Purchaser acknowledges that CNL GP shall resign, and
CNL GP agrees to resign, as to the sole general partner of HdC Parent
immediately prior to the Closing and prior to the execution of any loan
documents for the Replacement Debt and concurrently therewith admit an Affiliate
of Purchaser as the sole general partner of HdC Parent, whereupon such Affiliate
shall have full power and authority to execute, and shall execute, any and all
agreements, certifications or
25
other instruments on behalf of HdC Parent or any other Acquired Entity required
in connection with the closing of the Replacement Debt. No Seller shall execute,
any documents for, or have any liability under, or for, the Replacement Debt.
Further, the lender for the Replacement Debt shall acknowledge in writing to
Sellers that Sellers have and shall have no liability under, or for, the
Replacement Debt. If the Replacement Debt Commitment is not obtained pursuant to
the terms of the SHC Agreement on or before the Termination Time (as defined in
the SHC Agreement), Purchaser shall, upon the request of Sellers, terminate the
SHC Agreement and Sellers shall have the right to terminate this Agreement at
any time thereafter upon written notice to Purchaser, in which event Sellers
shall retain their rights to enforce the provisions of Section 8.6 which
expressly survive a termination of this Agreement and any resignations or other
documents delivered by Sellers shall be null and void and returned to Sellers.
7.8 Notification of Certain Matters. Until the Closing, each party
hereto shall promptly notify the other party in writing of any fact, change,
condition, circumstance or occurrence or nonoccurrence of any event of which it
is aware that will or is reasonably likely to result in any of the conditions
set forth in Sections 6.1 and 6.2 becoming incapable of being satisfied.
7.9 Name Change. At Closing, Purchaser shall cause the name of each of
the Acquired Entities to be changed to eliminate any reference to "CNL"
contained therein and following closing, neither Purchaser nor any Acquired
Entity shall use the name " CNL".
7.10 No Solicitation. Unless the SHC Agreement shall have been terminated
or this Agreement shall have been terminated pursuant to Sections 7.7 or 10.2,
or if the transaction contemplated hereby has not closed on or prior to the
Closing Date, Sellers shall not, and shall not permit the Acquired Entities to,
directly or indirectly through any member, officer, director, employee, agent,
affiliate or otherwise, enter into any agreement, agreement in principle or
other commitment (whether or not legally binding) relating to a Competing
Transaction or solicit, initiate or encourage the submission of any proposal or
offer from any Person relating to any Competing Transaction, nor participate in
any discussions or negotiations regarding, or furnish to any other Person any
information with respect to, or otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage, any effort or attempt by any other
Person to effect a Competing Transaction.
7.11 Liquor Licenses. To the extent permitted by Applicable Law, Sellers
or their Affiliates shall cooperate with Purchaser and Manager to transfer or
cause to be transferred to Replacement Manager (as defined in the SHC
Agreement), if Purchaser so elects and at Purchaser's expense, all alcoholic
beverage licenses held by Manager with respect to the operation of the
restaurant, bars and lounges presently located within the Hotel (and,
notwithstanding anything to the contrary herein or elsewhere, to the extent that
Applicable Laws prohibit the transfer of any portion of Inventory connected with
the same, the transfer of Inventory shall be appropriately limited or reduced as
necessary to comply with such Applicable Laws without otherwise delaying Closing
or reducing the HdC Interest Purchase Price, and such matters shall in no event
constitute any breach or default by Sellers or any failure of a condition
hereunder). If permitted under Applicable Law, such parties shall execute or
cause to be executed and file all necessary transfer or notification forms,
applications, questionnaires and other documents with the appropriate alcoholic
beverage
26
authorities prior to Closing, to the end that the transfer or continuance of the
existing licenses (and/or such related Inventory) or any applicable Acquired
Entity obtaining new licenses (if Purchaser so elects at its expense) shall take
effect, if possible, on the Closing Date, simultaneously with Closing. If not so
permitted or possible, then the parties agree each with the other that they will
promptly execute or cause to be executed all transfer or notification forms,
applications, questionnaires and other documents required by the liquor
authorities in order to effect such transfer or continuation of existing
licenses or issuance of new licenses at the earliest date in time possible
consistent with Applicable Law, in order that all existing alcoholic beverage
licenses (and/or such related Inventory) may be transferred, continued or new
alcoholic beverage licenses issued to Purchaser or its designee at the earliest
possible time. Purchaser acknowledges that the transfer, continuation or
issuance to Purchaser or its designee of any existing or new alcoholic beverage
license (as the case may be) is not a condition of Purchaser's obligation to
proceed to Closing.
7.12. Waiver of Transfer Restrictions. Subject to and conditioned upon the
occurrence of the Closing on or prior to the Closing Date, each Seller hereby
waives (and shall cause its Affiliates to waive) any right to purchase the HdC
Interests or otherwise exercise any rights under the limited partnership
agreement of HdC Parent in a manner inconsistent with the consummation of the
transactions contemplated by this Agreement including, without limitation, any
so-called "ROFO", "tag-along" or "put" rights.
7.13 Modification of SHC Agreement. Purchaser shall not amend or modify
the SHC Agreement without Sellers' prior written consent (not to be unreasonably
withheld or delayed or waive any material condition or right therein); provided,
however, that in no event shall the forms of the Transaction Documents (as
defined in the SHC Agreement) or any amendments or modifications thereof be
subject to Sellers' approval or consent (it being understood that the terms and
conditions of such Transaction Documents address matters that are of concern
only to Sellers and SHC).
7.14. Pursuit of North Beach Project. Sellers and Purchaser shall cause
the applicable Acquired Entities to diligently pursue the North Beach Project
substantially in accordance with the North Beach Plan and Budget, and if funding
is necessary to do so and a loan is not obtained to fund the same, Purchaser and
CNL may elect to call for capital under the HdC Venture Agreement to fund the
same, in which event CNL shall be reimbursed for its contributions at Closing to
the extent provided in Section 2.3(a).
ARTICLE VIII
CLOSING
8.1 Closing. The Closing shall occur as herein provided at 10:00 a.m. on
January 9, 2006, or such later date and time as Purchaser's Representative and
Sellers may mutually agree upon in writing (the "Closing Date"), in either case,
with time being of the essence; subject, however, to the right of Purchaser's
Representative, in its sole and absolute discretion, to extend the Closing Date
(i) to the ninth (9th) day of the month immediately following the month in which
the Closing Date would otherwise occur, or (ii) as otherwise expressly permitted
elsewhere in this Agreement; provided that in no event shall the transaction
contemplated hereby close any later than February 9, 2006. If the Closing
27
hereunder does not close by February 9, 2006, (except due to Seller's willful
refusal to close notwithstanding the satisfaction of all conditions precedent),
this Agreement shall automatically terminate and be of no further force or
effect. Except as otherwise permitted under this Agreement, such date and time
may not be extended without the prior written approval of Sellers'
Representative and Purchaser. As more particularly described below, at the
Closing the parties hereto will (i) execute or cause to be executed, or instruct
the Escrow Agent to release, all of the documents required to be delivered in
connection with the transactions contemplated hereby (the "Closing Documents"),
(ii) deliver or cause to be delivered the same to Escrow Agent to the extent not
delivered to Escrow Agent on or before the Effective Date, and (iii) take or
cause to be taken all other action required to be taken in respect of the
transactions contemplated hereby. The Closing will occur at the offices of
Xxxxxx, Xxxx & Xxxxxxxx LLP, 000 Xxxxx Xxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx
00000, or at such other place as Purchaser and Sellers may mutually agree. At
the Closing, Purchaser shall deliver the balance of the Adjusted Purchase Price
to Escrow Agent as herein provided. If the Closing does not occur as provided in
this Section 8.1, the provisions of Section 6.4(a) and Article X set forth the
sole and exclusive rights and remedies of the parties hereto.
8.2 Sellers' Deliveries. On or before the Closing Date (unless otherwise
expressly provided herein), Sellers shall deliver or cause to be delivered to
Escrow Agent in escrow against receipt by Sellers of the purchase price for the
HdC Interests, all of the following instruments, each of which shall have been
duly executed by the applicable Sellers and shall be dated to be effective as of
the Closing Date:
(a) Four (4) original counterparts of each of the HdC Entity
Assignments;
(b) One (1) original FIRPTA Certificate with respect to each
Seller;
(c) On or before the Closing Date, a certificate from each
Seller as to itself (which representation shall be deemed a representation made
pursuant to and contained in and subject to Article III and shall be subject to
the limitations on survival and remedies set forth in Section 10.3) that such
Seller's Seller-Specific Representations and Warranties are true and correct in
all material respects as of the Closing Date as if then made, subject to matters
disclosed in such certificate in addition to any matters set forth in the
Disclosure Schedule; and
(d) Any other document or instrument specifically required
by this Agreement.
8.3 Purchaser's Deliveries. On or before the Closing Date (unless
otherwise expressly provided), Purchaser shall deliver to Escrow Agent the
following, duly executed by Purchaser, and shall be dated to be effective as of
the Closing Date:
(a) Four (4) original counterparts each of the HdC Entity
Assignment;
(b) Purchaser shall deliver to Escrow Agent the HdC Interest
Purchase Price for each HdC Interest being purchased; and
28
(c) Any other document or instrument specifically required by this
Agreement.
8.4 Mutual Deliveries. At the Closing, Purchaser and Sellers,
shall mutually execute and deliver each to the other:
(a) Subject to the provisions of Section 7.12, such other
documents, instruments and undertakings as may be required by the liquor
authorities of the State of California, or of any county or municipality or
governmental entity having jurisdiction with respect to the transfer or issue of
liquor licenses or alcoholic beverage licenses or permits for the Hotel, to the
extent not theretofore executed and delivered; and
(b) Such other and further documents, papers and instruments
as may be reasonably required by the parties hereto or their respective counsel
or the Title Company (as defined in the SHC Agreement) which are not
inconsistent with this Agreement or the other Closing Documents including,
without limitation, in the case of CNL GP, the non-imputation affidavit in the
form of Exhibit H hereto. The form and content of such other and further
documents are subject to the approval of Sellers and Purchaser, which will not
be unreasonably withheld.
To the extent the delivery of any of the items in Sections 8.2, 8.3 or 8.4
are conditions precedent to the obligation of a party pursuant to Sections 6.1
or 6.2, and the condition relating to any such item is not satisfied as of
Closing, but the party for whose benefit such unsatisfied condition is made
elects, nonetheless, to proceed to Closing, the delivery of the item applicable
to the unsatisfied condition shall not be required pursuant to the provisions of
Sections 8.2, 8.3 or 8.4.
8.5 Actions of Escrow Agent. On the Closing Date, provided that Escrow
Agent has received each of the items described in Section 8.2 and 8.3 and
confirmation from Sellers and Purchasers that the deliveries contemplated by
Section 8.4 have occurred or have otherwise been waived, Escrow Agent shall take
the following actions in the order indicated below:
(a) Deliver to each Seller, in immediately available funds, the
Allocated HdC Interest Adjusted Price for such Seller's HdC Interest;
(b) Consolidate the executed counterparts of the HdC Interest
Assignments and deliver to each party thereto two (2) duplicate original
counterparts of each such fully executed document; and
(c) Deliver to Purchaser the original FIRPTA Certificate executed
by each Seller.
8.6 Closing Costs. Except as otherwise expressly provided in this
Agreement, each party hereto shall pay its own legal fees and expenses. All
transfer, recording, sales, or other similar taxes and surtaxes due with respect
to the transfer of the HdC Interests (if any) shall be borne by Purchaser. The
cost for escrow fees of the Escrow Agent shall be split equally between Sellers,
on the one hand, and Purchaser, on the other hand. If this Agreement is
terminated other than by reason of a default by any party hereto, Sellers, on
the one hand, and Purchaser, on the other hand, shall equally bear Escrow
Agent's cancellation charges, if any. If this Agreement is
29
terminated by reason of the default of any party, the expenses referenced in
clauses (i) and (ii) of the preceding sentence shall be borne exclusively by the
defaulting party. The provisions of this Section 8.6 shall survive any
termination of this Agreement.
ARTICLE IX
CASUALTY; CONDEMNATION
9.1 Fire or Other Casualty. Purchaser's Representative shall give
Sellers prompt notice of any fire or other casualty to HdC (or any portion
thereof) costing more than Two Hundred Fifty Thousand Dollars ($250,000) to
restore or repair, and the amount estimated by Purchaser's Representative as
being required to restore or repair same, and occurring between the Effective
Date and the Closing Date of which Purchaser's Representative has actual
knowledge. If the cost of such restoration or repair is less than Twenty-Five
Million Dollars ($25,000,000) (the "Casualty Threshold"), then no party shall
have the right to terminate its obligations under this Agreement by reason
thereof and the Closing shall take place without abatement of HdC Interest
Purchase Price, but Purchaser shall have the right to retain at the Closing all
of the Acquired Entities' interest in any insurance proceeds (except use and
occupancy insurance, rent loss and business interruption insurance, and any
similar insurance, in each case, for the period preceding the Closing Date) that
may be payable to Sellers or any Acquired Entity on account of any such fire or
other casualty, plus Sellers shall credit 50% of the amount of any deductibles
under any policies related to such proceeds to the HdC Interest Purchase Price,
to the extent such deductibles or proceeds have not been previously expended or
are otherwise required to reimburse Sellers or any Acquired Entity for actual
expenditures of restoration . If the cost of such restoration or repair equals
or exceeds the Casualty Threshold, Purchaser may terminate this Agreement upon
written notice to Sellers, in which event all other rights and obligations of
the parties hereunder (except those set forth herein which expressly survive a
termination of this Agreement) shall terminate immediately. Should Purchaser
nevertheless elect to proceed to Closing with respect to the HdC Interests, the
Closing shall take place without abatement of the HdC Purchase Price and at
Closing Sellers shall assign to Purchaser all of Sellers' interest in any
insurance proceeds (except use and occupancy insurance, rent loss and business
interruption insurance, and any similar insurance, in each case, for the period
preceding the Closing Date) that may be payable to Sellers or an Acquired Entity
on account of any such fire or other casualty, plus Sellers shall credit 50% of
the amount of any deductibles under any policies related to such proceeds to the
HdC Interest Purchase Price, to the extent such deductibles or proceeds have not
been previously expended or are otherwise required to reimburse Sellers or an
Acquired Entity for actual expenditures of restoration.
9.2 Condemnation. After the Effective Date, Purchaser's Representative
shall give Sellers prompt notice of any notice it actually receives (or actual
knowledge it otherwise obtains) of any taking by condemnation (actual, pending
or threatened) of any part of or rights appurtenant to the Real Property. If
such taking could reasonably be expected to result in a permanent loss of market
value of HdC in excess of the Casualty Threshold, Purchaser may terminate its
obligations under this Agreement by written notice to Sellers" Representative
within ten (10) days after Purchaser's Representative has given Sellers the
notice of taking
30
referred to in this Section 9.2, or on the Closing Date, whichever is earlier,
in which event ) all other rights and obligations of the parties hereunder
(except those set forth herein which expressly survive a termination of this
Agreement) shall terminate immediately. If Purchaser does not so elect to
terminate its obligations hereunder, then the Closing shall take place as
provided herein, and Sellers shall assign to Purchaser at the Closing all of
Seller's interest in any condemnation award which may be payable to Sellers or
any Acquired Entity (as the case may be) on account of any such condemnation
and, at Closing, Sellers shall credit to the amount of the Purchase Price
payable by Purchaser the amount, if any, of condemnation proceeds received by
Sellers or any Acquired Entity between the Effective Date and Closing less (i)
any amounts reasonably expended by Sellers or any Acquired Entity in collecting
such sums, (ii) any amounts reasonably used by Sellers or any Acquired Entity to
repair HdC as a result of such condemnation, and (iii) any amounts which are
reasonably allocated to lost earnings or other damages or losses (other than
unrepaired property damages) reasonably allocated or attributed to the period of
time prior to Closing. If, prior to the Closing, there shall occur a taking by
condemnation of any part of or rights appurtenant to HdC that does not result in
a permanent loss of market value of the Hotel in excess of the Casualty
Threshold, Purchaser shall not have the right to terminate its obligations under
this Agreement by reason thereof and the Closing shall take place without
abatement of the Purchase Price, but Sellers shall assign to Purchaser at the
Closing all of Sellers' interest in any condemnation award which may be payable
to Sellers or any Acquired Entity on account of any such condemnation and, at
Closing, Sellers shall credit to the amount of the HdC Purchase Price payable by
Purchaser the amount, if any, of condemnation proceeds received by Sellers or
any Acquired Entity between the Effective Date and Closing less (i) any amounts
reasonably expended by Sellers or any Acquired Entity in collecting such sums,
(ii) any amounts reasonably used by Sellers or any Acquired Entity to repair HdC
as a result of such condemnation, and (iii) any amounts which are reasonably
allocated to lost earnings or other damages or losses (other than unrepaired
property damages) reasonably allocated or attributed to the period of time prior
to Closing. Provided Purchaser has not exercised its right to terminate this
Agreement pursuant to this Section 9.2, Sellers' Representative shall notify
Purchaser in advance regarding any proceeding or negotiation with respect to the
condemnation and Purchaser shall have a reasonable right, at its own cost and
expense, to appear and participate in any such proceeding or negotiation.
ARTICLE X
DEFAULT; TERMINATION RIGHTS; INDEMNITY
10.1 Default by Sellers.
(a) If the Closing does not occur due to (i) any representation or
warranty of any Seller contained in Article III, being inaccurate in any
material respect when made or deemed made (without limiting the effect of
Section 6.5), or (ii) the failure or inability of any Seller to perform its
obligations hereunder in any material respect, which, in either case, is not
cured within fifteen (15) days after notice thereof from Purchaser (which
fifteen (15) day period shall, if necessary, automatically extend the Closing
Date to the expiration date of such fifteen (15) day period), and if
individually or in the aggregate, the Losses incurred by the Purchaser
Indemnified Parties resulting from such inaccuracies or nonperformances
described in clauses (i) and (ii) of this sentence reasonably would be expected
to exceed Five Million
31
Dollars ($5,000,000) (the "Threshold Amount"), so long as all conditions
precedent to Sellers' obligations hereunder have been satisfied (other than any
conditions precedent which are not satisfied due to the default by any Seller),
then Purchaser, as its sole and exclusive remedy, shall elect either (x) to
terminate this Agreement, and the provisions of Section 8.6 which expressly
survive a termination of this Agreement, and all other rights and obligations of
the parties hereunder (except those set forth in this clause (x)) shall
terminate immediately; (y) to irrevocably waive such default, nonperformance,
inaccuracy or breach and proceed to Closing with reduction in the HdC Interest
Purchase Price equal to the reasonably estimated Losses over and above the
Deductible (but in no event more than $4,000,000); or (z) to commence an action
for specific performance; provided, however, that the remedy of specific
performance shall be available to Purchaser only in the case of a willful
refusal to close by Sellers and in the event Purchaser files a suit for specific
performance within forty-five (45) days following the Closing Date, failing
which, Purchaser shall be barred from enforcing Sellers' obligations in such
manner and shall be deemed to have elected to terminate this Agreement pursuant
to clause (x). Notwithstanding anything contained in Section 2.5 to the
contrary, SHC shall be an express third party beneficiary of clause (z) of the
preceding sentence and shall be entitled to specifically enforce Sellers'
obligations as therein provided unless Purchaser has elected either of the
remedies set forth in clauses (x) ,(y) or (z) of the preceding sentence,
provided Purchaser would otherwise be obligated to close and SHC and Purchaser
are ready, willing and able to close under the SHC Agreement but for Sellers'
willful refusal to close hereunder. In the event that Purchaser elects to
terminate this Agreement pursuant to clause (x) above, Sellers may elect within
two (2) Business Days after receipt of Purchaser's notice to nullify Purchasers'
notice of termination by agreeing to reduce the HdC Interest Purchase Price by
the reasonably estimated Losses over and above the Deductible, whereupon
Purchaser shall be obligated to proceed to Closing.
(b) If (i) any representation or warranty of any Seller contained
in Article III shall be inaccurate in any material respect when made or deemed
made (without limiting the effect of Section 6.5), or (ii) any Seller defaults
in the performance of any of its obligations under this Agreement in any
material respect which are performable prior to Closing, and if the aggregate
Losses incurred by the Purchaser Indemnified Parties resulting from such
inaccuracies or nonperformances described in clauses (i) and (ii) of this
sentence reasonably would not be expected to exceed the Threshold Amount, then,
assuming that all of the other conditions set forth in Section 6.1 have been
satisfied, and provided such inaccuracy or such default is not the result of any
intentional misconduct on the part of any Seller, Purchaser shall be obligated
to proceed to Closing with no reduction in the HdC Interest Purchase Price, and
Purchaser's sole and exclusive remedies with respect thereto shall be as
provided in Sections 10.3 and 10.4 (with the Losses incurred by the Purchaser
Indemnified Parties shall be carried forward and applied against the Deductible
with respect to Surviving Claims).
10.2 Default by Purchaser. If the Closing does not occur due to
Purchaser's failure or inability to perform any of its obligations hereunder in
any material respect, then Sellers, as their sole and exclusive remedy, shall
elect either: (x) to terminate this Agreement in which event (A) Sellers shall
retain their right to enforce the provisions of Section 8.6 which expressly
survive a termination of this Agreement, and (B) all other rights and
obligations of Sellers and Purchaser hereunder (except those referenced in
clause (A)) shall terminate
32
immediately; or (y) to waive such matter or condition and proceed to Closing; or
(z) to commence an action for specific performance; provided, however, that the
remedy of specific performance shall be available to Sellers only in the case of
a willful refusal to close by the Purchaser and in the event Sellers file a suit
for specific performance within forty-five (45) days following the Closing Date,
failing which, Sellers shall be barred from enforcing Purchaser obligations in
such manner and shall be deemed to have elected to terminate this Agreement
pursuant to clause (x).
10.3 Surviving Claims. Any claim for any breach or inaccuracy of a
representation or warranty made or contained (or deemed contained) in Article
III for which Section 10.1 expressly provides that this Section 10.3 shall
govern, shall survive Closing for twelve (12) months only as to the
representations and warranties made and contained (or deemed contained) in
Article III, after which such representations and warranties shall merge into
the Closing Documents (collectively, the "Surviving Representations"), except to
the extent that any such breach or inaccuracy has otherwise been waived pursuant
to Section 6.5, Section 10.1 or elsewhere in this Agreement. Any claim arising
out of a default in the performance by any Seller of its obligations under this
Agreement to be performed on or prior to Closing for which Section 10.1
expressly provides that this Section 10.3 shall govern shall survive Closing for
twelve (12) months only after which such obligations shall merge into the
Closing Documents (a "Surviving Covenant").
Any claim (a "Surviving Claim") arising out of (i) a breach of a Surviving
Representation or (ii) a default of a Surviving Covenant, shall be forever
barred unless Purchaser, as its sole and exclusive remedy for a Surviving Claim,
(a) no later than ten (10) days following the expiration of such twelve (12)
month survival period delivers to Sellers a written notice of the Surviving
Claim setting forth the basis for such Surviving Claim (including copies of any
summons, complaint or other pleading which may have been served on it and any
written claim, demand, invoice, billing or other document evidencing or
asserting same), and (b) no later than one (1) year following the Closing Date,
files a complaint or petition against the applicable Seller(s) alleging such
Surviving Claim in an appropriate Federal district or state court in Los Angeles
County, California. Purchaser hereby acknowledges and agrees that Purchaser's
exclusive remedies for any Surviving Claim shall be limited to the provisions
for indemnification set forth in Section 10.4, and Purchaser hereby waives and
relinquishes all other rights and remedies available to it at law, in equity or
otherwise (including, without limitation, the right to seek damages or equitable
relief from Sellers or their Affiliates on account thereof).
Purchaser acknowledges that if SHC provides Purchaser with a Diligence
Termination Notice (as defined in the SHC Agreement), Purchaser shall promptly
notify Sellers, and Purchaser and Sellers shall jointly consult as to whether
Purchaser shall provide a Diligence Cure Notice; provided that if Purchaser does
not elect to deliver the Diligence Cure Notice and make the corresponding
deposit into Escrow required under the penultimate paragraph of Section 2.7 of
the SHC Agreement to effect such cure, then Sellers in their sole and absolute
discretion shall have the right, but not the obligation, to do so on Purchaser's
behalf at Sellers' sole cost and expense.
The provisions of this Section 10.3 shall survive the Closing.
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10.4 Indemnity.
(a) Subject to Section 10.3, effective upon the Closing, Sellers
shall jointly and severally indemnify Purchaser, their respective Affiliates and
its and their respective officers, directors, employees, agents and
representatives (each a "Purchaser Indemnified Party") and hold each of them
harmless against any out-of-pocket damages, costs, liabilities, losses,
judgments, Taxes, penalties, fines, expenses or other costs, including
reasonable attorneys fees, costs of defense and costs of collection but not lost
profits, consequential damages or punitive damages (collectively, "Losses")
incurred by any such Purchaser Indemnified Parties with respect to any Surviving
Claim; provided, however, that (x) no amounts shall be payable by Sellers unless
and until the aggregate amount otherwise payable by Sellers in the absence of
this clause exceeds the sum of One Million Dollars ($1,000,000) (the
"Deductible"), in which event Sellers shall be liable for the amount (if any) in
excess of the Deductible, and (y) in no event shall the amount payable by
Sellers under this Section 10.4(a) exceed, in the aggregate, Thirteen Million
Five Hundred Thousand Dollars ($13,500,000).
(b) Purchaser shall indemnify and hold each Seller and its
Affiliates and its and their respective officers, directors, employees, agents
and representatives (each a "Seller Indemnified Party") and hold each of them
harmless against any Losses incurred by any such Seller Indemnified Party
arising from or relating to: (i) any breach of any of the representations and
warranties made by Purchaser in this Agreement; (ii) any breach of the covenants
and agreements made by Purchaser in this Agreement or any of the Closing
Documents; and (iii) any Losses or liabilities which have resulted in a
reduction of the HdC Interest Purchase Price under Article II or any other
provision of this Agreement .
(c) For all purposes of this Article X, "Losses" shall be net of
(i) any insurance (other than any self-insured retention program) or other
recoveries paid by a third-party to the Indemnified Party or its Affiliates in
connection with the facts, events or circumstances giving rise to the right of
indemnification and (ii) any net Tax benefit available to such Indemnified Party
or its Affiliates arising in connection with the accrual, incurrence or payment
of any such Losses (including the net present value of any Tax benefit arising
in subsequent taxable years).
10.5. Indemnification Procedures. Upon the occurrence of any event giving
rise to a claim for indemnification (an "Indemnification Claim") under any
provision of this Agreement or any Closing Document, the party seeking
indemnification (the "Indemnified Party") shall promptly notify the other party
(the "Indemnitor") of such Indemnification Claim and provide the Indemnitor with
copies of any documents describing or otherwise bearing on the subject matter of
such indemnification obligation; provided, however, that the failure to notify
Indemnitor shall not relieve Indemnitor from any liability which Indemnitor may
have under the Indemnification Claim except to the extent that it has been
materially prejudiced by such failure. Indemnitor shall be entitled to
participate in any pending or threatened claim, action, suit or proceeding in
respect of the Indemnification Claim and, to the extent that it wishes, assume
the defense thereof with counsel reasonably satisfactory to the Indemnified
Party. After notice from the Indemnitor to the Indemnified Party of its election
to assume the defense of such claim, action, suit or proceeding, Indemnitor
shall not be liable to the Indemnified
34
Party for any legal or other expenses subsequently incurred by the Indemnified
Party in connection with the defense thereof except as provided in the following
sentence. The Indemnified Party shall have the right to employ separate counsel
in any such claim, action, suit or proceeding and to participate in the defense
thereof but the fees and expenses of such counsel shall be at the expense of the
Indemnified Party unless (i) the employment thereof has been specifically
authorized by the Indemnitor in writing, or (ii) there is, in the reasonable
opinion of independent counsel, a conflict concerning any material issue between
the position of the Indemnitor and the Indemnified Party, in which case if the
Indemnified Party notifies Indemnitor in writing that it elects to employ
separate counsel at the expense of Indemnitor, then Indemnitor shall not have
the right to assume the defense of the claim, action, suit or proceeding on
behalf of the Indemnified Party, but in such event the Indemnitor shall not be
required to pay the charges and expenses of counsel other than (i) counsel
retained by Indemnitor to assume the defense of one or more Indemnified Parties
and (ii) one separate counsel retained by all other Indemnified Parties. Nothing
set forth herein is intended to or shall impair the right of any Indemnified
Party to retain separate counsel at its own expense. If the Indemnitor does not
elect to engage attorneys or other persons to defend against such claim, action,
suit or proceeding, the Indemnitor shall pay the reasonable charges and expenses
of such attorneys and other persons as are engaged by the Indemnified Party on a
current basis within thirty (30) days after submission of invoices or bills
therefor, provided that the Indemnified Party shall promptly repay to the
Indemnitor the amount of any such charges and expenses if it is ultimately
determined that the Indemnified Party was not entitled to be indemnified in
connection with such matter. The Indemnitor will not settle or compromise or
consent to the entry of any judgment in any pending or threatened claim, action,
suit or proceeding in respect of the Indemnification Claim unless, (i)
Indemnitor shall have given the Indemnified Party reasonable prior written
notice thereof and shall have obtained an unconditional release of the
Indemnified Party from all liability arising out of such claim, action, suit or
proceeding, or (ii) Indemnitor reaffirms in writing its indemnity obligations
hereunder regardless of Applicable Laws to the contrary. As long as Indemnitor
has complied with its obligations to defend and indemnify, Indemnitor shall not
be liable for any settlement made by the Indemnified Party without the consent
of Indemnitor (which consent shall not be unreasonably withheld or delayed).
10.6 Exclusive Remedy. The provisions for indemnification set forth in
this Article X are the exclusive remedies of Sellers and Purchaser arising out
of or in connection with this Agreement, and shall be in lieu of any rights
under contract, tort, equity or otherwise; provided, however, that if Purchaser
brings suit for specific performance against Sellers under 10.1(a)(ii)(z) or if
Sellers bring suit for specific performance against Purchaser under 10.2(z), the
party bringing such suit for specific performance shall be entitled to receive
their reasonable attorneys' fees and costs of suit in such action.
ARTICLE XI
TAX MATTERS
11.1 Tax Returns.
(a) Sellers shall prepare, or shall cause to be prepared, and
shall file or cause to be filed, all income Tax Returns of any Acquired Entity
for taxable years that end on
35
the Closing Date, and all other Tax Returns the due date of which is before the
Closing Date. Purchaser shall cooperate, and cause each Acquired Entity to
cooperate, with the reasonable requests of the Sellers in connection with the
filing of any such Tax Return, including, without limitation, the execution of
any such Tax Return (provided that such Tax Return is complete in all material
respects and there is a reasonable basis for the positions taken in such Tax
Return) or of any other document required to be filed with any Taxing Authority
in connection therewith. Except as required by Applicable Law, such Tax Returns
shall be prepared in a manner that is consistent with past practice.
(b) Purchaser shall prepare or cause to be prepared and shall file
or cause to be filed all other Tax Returns of the Acquired Entities. Except as
required by Applicable Law, such Tax Returns shall be prepared in a manner that
is consistent with past practice. Purchaser shall deliver a copy of any Tax
Returns covering any period ending on or prior to the Closing Date, completed in
draft form, at least fifteen (15) days before the due date thereof for the
review and approval of Sellers, which shall not to be unreasonably withheld or
delayed
11.2 Contests. For purposes of this Agreement, a "Contest" is any audit,
court proceeding or other dispute with respect to any tax matter that affects an
Acquired Entity. Unless Purchaser has previously received written notice from
Sellers of the existence of such Contest, Purchaser shall give written notice to
Sellers of the existence of any Contest relating to a Tax matter arising in a
period ending on or before the Effective Date within ten (10) days from the
receipt by Purchaser of any written notice of such Contest, but no failure to
give such notice shall relieve the Seller of any liability hereunder. Unless
Sellers have previously received written notice from Purchaser of the existence
of such Contest, the applicable Seller shall give written notice to Purchaser of
the existence of any Contest for which Purchaser has responsibility within ten
(10) days from the receipt by such Seller of any written notice of such Contest.
Purchaser, on the one hand, and Sellers, on the other, agree, in each case at no
cost to the other party, to cooperate with the other and the other's
representatives in a prompt and timely manner in connection with any Contest.
Such cooperation shall include, but not be limited to, making available to the
other party, during normal business hours, all books, records, Tax Returns,
documents, files, other information (including working papers and schedules),
officers or employees (without substantial interruption of employment) or other
relevant information necessary or useful in connection with any Contest
requiring any such books, records and files. Sellers shall, at their election,
have the right to represent an Acquired Entity's interests in any Contest
relating to a Tax matter arising in a period ending on or before the Effective
Date, to employ counsel of its choice at their expense and to control the
conduct of such Contest, including settlement or other disposition thereof;
provided, however, that Purchaser shall have the right to consult with the
Sellers regarding any such Contest that may affect such Acquired Entity for any
periods ending after the Closing Date at Purchaser's own expense; and provided
further, that any settlement or other disposition of any such Contest may only
be with the consent of Purchaser, which consent will not be unreasonably
withheld.
11.3 Survival. Notwithstanding anything contained herein to the contrary,
all obligations under this Article XI shall survive the Closing hereunder and
continue until 90 days following the expiration of the period of limitations
applicable to the related Tax.
36
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Completeness; Modification. Except as otherwise expressly provided
herein, this Agreement, and the Closing Documents, constitute the entire
agreement between the parties hereto, and supersede all prior discussions,
understandings, agreements and negotiations between the parties hereto with
respect to the transactions contemplated hereby. Subject to Section 12.7, this
Agreement may be modified only by a written instrument duly executed by the
parties hereto.
12.2 Assignments. Neither Purchaser nor Sellers may assign their rights
hereunder without the prior written consent of the other parties hereto, and any
such assignment shall not relieve the assignor of its obligations under this
Agreement. Purchaser may (i) designate an Affiliate to take title to and acquire
the HdC Interests, and to perform Purchaser's obligations with respect to the
Closing, including execution and delivery of Closing Documents, provided that no
designation pursuant to the preceding sentence shall relieve the Purchaser from
liability for performance of its obligations hereunder or under the Closing
Documents executed by the designee, except with the express written consent of
the other parties hereto; and (ii) designate a Designee or Designees to which
Seller shall transfer, convey, assign and deliver, on the terms and conditions
contained in Section 2.7, all or any part of the HdC Interests. Notwithstanding
the foregoing, Purchaser shall so designate an Affiliate of Purchaser to take
title to the GP Interest so that HdC Parent will continue to be a limited
partnership with at least two partners following the Closing.
12.3 Successors and Assigns. This Agreement shall bind and inure to the
benefit of the parties hereto and their permitted respective successors and
assigns.
12.4 Days. If any action is required to be performed, or if any notice,
consent or other communication is given, on a day other than a Business Day,
such performance shall be deemed to be required, and such notice, consent or
other communication shall be deemed to be given, on the first Business Day
following such non-Business Day. Unless otherwise specified herein, all
references herein to a "day" or "days" shall refer to calendar days and not
Business Days.
12.5 Governing Law. This Agreement and all documents referred to herein
shall be governed by and construed and interpreted in accordance with the laws
of the State of California without regard to its principles of conflicts of law.
The parties hereby waive trial by jury in any action, proceeding or counterclaim
brought by any of the parties hereto against any other party in respect of any
matter arising out of or in connection with this Agreement. All disputes,
litigation, proceedings or other legal actions by a party to this Agreement in
connection with or relating to this Agreement or any matters described or
contemplated in this Agreement shall be instituted in the courts of the State of
California sitting in Los Angeles County, California, or of the United States
sitting in the Central District of California. Each party to this Agreement
irrevocably submits to the exclusive jurisdiction of the courts of the State of
California sitting in Los Angeles County, California and of the United States
sitting in the Central District of California in connection with any such
dispute, litigation, action or proceeding arising out of or relating to this
Agreement. Each party further agrees that any
37
service of process or summons in connection with any such dispute, litigation,
action or proceeding may be served on it by mailing a copy of such process or
summons in the manner required by applicable law.
EACH OF SELLERS AND PURCHASER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER ARISING IN TORT OR CONTRACT) BROUGHT
BY ANY OF THE PARTIES HERETO AGAINST ANY OF THE OTHERS ON ANY MATTERS WHATSOEVER
ARISING OUT OF OR IN ANY WAY CONNECTION WITH THIS AGREEMENT, OR FOR THE
ENFORCEMENT OF ANY REMEDY IN CONNECTION HEREWITH. THE PROVISIONS OF THIS SECTION
12.5 SHALL SURVIVE THE CLOSING.
12.6 Counterparts. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required. It shall not be necessary
that the signature on behalf of each party hereto appear on each counterpart
hereof. All counterparts hereof shall collectively constitute a single
agreement. Facsimile signatures shall have the same valid and binding effect as
original signatures.
12.7 Purchaser's Representative. Except as otherwise provided in this
Section 12.7, KSL II Management Operations, LLC is hereby appointed as the
representative of Purchaser under this Agreement ("Purchaser's Representative"),
and shall act as exclusive agent and attorney-in-fact to act on behalf of
Purchaser with respect to any and all matters, claims controversies, or disputes
arising out of the terms of this Agreement. Purchaser's Representative shall
have the power to take any and all actions which Purchaser's Representative
believes are necessary or appropriate or in the best interests of Purchaser, as
fully as if Purchaser was acting on its own behalf with respect to all matters
concerning Purchaser following the Closing Date, including with respect to (i)
all claims for indemnification under this Agreement, and (ii) the resolution of
all matters related to the purchase price adjustment under Article II, and
Purchaser's Representative may take any action, or no action, in connection
therewith as Purchaser's Representative may deem appropriate as effectively as
could act itself, including the settlement or compromise of any dispute or
controversy; provided that this Agreement shall not be amended, waived or
modified without the consent of each party hereto. The authority granted
hereunder is deemed to be coupled with an interest. To the extent Purchaser's
Representative is permitted to take action pursuant to this Section 12.7,
Sellers shall have the right to rely on any actions taken or omitted to be taken
by Purchaser's Representative as being the act or omission of Purchaser, without
the need for any inquiry, and any such actions or omissions shall be binding
upon Purchaser. Purchaser's Representative shall incur no liability or expense
as a result of any action taken in good faith hereunder, including any legal
fees and expenses. Notwithstanding the foregoing, the provisions of this Section
12.7 shall not apply to any claim for indemnification against Purchaser pursuant
to Section 10.4(b), which claim shall be defended solely by Purchaser.
12.8 Severability. If any term, covenant or condition of this Agreement,
or the application thereof to any person or circumstance, shall to any extent be
invalid or
38
unenforceable, the remainder of this Agreement, or the application of
such term, covenant or condition to other persons or circumstances, shall not be
affected thereby, and each term, covenant or condition of this Agreement shall
be valid and enforceable to the fullest extent permitted by law, unless such
severance would cause a materially adverse economic result to the party against
whom this Agreement is sought to be enforced.
12.9 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered by hand, transmitted by
facsimile transmission, sent prepaid for next Business Day delivery by Federal
Express (or a comparable overnight delivery service), at the addresses and with
such copies as designated below.
If to Sellers or Sellers' Representative: c/o CNL KSL Partners GP, LLC.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attn.: Chief Financial Officer
Facsimile: (000) 000-0000
and: Lowndes Drosdick Xxxxxx Xxxxxx &
Xxxx, P.A.
000 Xxxxx Xxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxx Xxxxxx, Esq.
Facsimile: (000) 000-0000
If to Purchaser: KSL II Management Operations, LLC
00-000 Xxxxxxx Xxxxxxxx
Xx Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx Xxxxxxx
Xxxx Xxxx, Esq.
Facsimile: (000) 000-0000
and: Kohlberg Kravis Xxxxxxx & Co.
0 Xxxx 00xx Xxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxx Xxxx
Tagar Xxxxx
Facsimile: (000) 000-0000
and: Xxxxxx, Xxxx & Xxxxxxxx, LLP
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn.: Xxxxxxx Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
If to Purchaser's Representative: KSL II Management Operations, LLC
00-000 Xxxxxxx Xxxxxxxx
00
Xx Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx Xxxxxxx
Xxxx Xxxx, Esq.
Facsimile: (000) 000-0000
If to Escrow Agent: First American Title Insurance Company
000 Xxxxx Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxx Xxxxxxx
Facsimile: (000) 000-0000
Any party hereto may change its address or designate different or other
persons or entities to receive copies by notifying the other parties and Escrow
Agent in a manner described in this Section 12.9. Any notice, request, demand or
other communication delivered or sent in the manner aforesaid may be given by
the party required to give such notice or its attorney, and shall be deemed
given or made (as the case may be) when actually delivered to or refused by the
intended recipient.
In the case of any notice or communication which by the terms of this
Agreement will result in an automatic consequence (such as a deemed approval or
termination) after a specified period in the absence of a response or other
action by the recipient, such notice shall expressly state that such consequence
will occur after such specified period in the absence of such response or
action.
12.10 Escrow Agent. Escrow Agent referred to in the definition thereof
contained in Section 1.1 has agreed to act as such for the convenience of the
parties without fee or other charges for such services as Escrow Agent. Escrow
Agent shall not be liable: (i) to any of the parties for any act or omission to
act, except for its own negligence or willful misconduct; (ii) for any legal
effect, insufficiency, or undesirability of any instrument deposited with or
delivered by Escrow Agent or exchanged by the parties hereunder, whether or not
Escrow Agent prepared such instrument; (iii) for any loss or impairment of funds
that have been deposited in escrow while those funds are in the course of
collection, or while those funds are on deposit in a financial institution, if
such loss or impairment results from the failure, insolvency or suspension of a
financial institution; (iv) for the expiration of any time limit or other
consequence of delay, unless a properly executed written instruction, accepted
by Escrow Agent, has instructed Escrow Agent to comply with said time limit; and
(v) for the default, error, action or omission of either party to the escrow.
Escrow Agent, in its capacity as escrow agent, shall be entitled to rely on any
document or paper received by it, believed by such Escrow Agent, in good faith,
to be bona fide and genuine. In the event of any dispute as to the disposition
of the Deposit or any other monies held in escrow, or of any documents held in
escrow, Escrow Agent may, if such Escrow Agent so elects, interplead the matter
by filing an interpleader action in a court of competent jurisdiction in Los
Angeles County, California, and pay into the registry of the court the Deposit,
or deposit any such documents with respect to which there is a dispute in the
registry of such court, whereupon such Escrow Agent shall be relieved and
released from any further liability with respect to the Deposit as Escrow Agent
hereunder. Escrow Agent shall not be liable for Escrow Agent's compliance with
any legal
40
process, subpoena, writ, order, judgment and decree of any court, whether issued
with or without jurisdiction, and whether or not subsequently vacated, modified,
set aside or reversed.
12.11 Incorporation by Reference. All of the exhibits and schedules hereto
are by this reference incorporated herein and made a part hereof.
12.12 Further Assurances. Upon the terms and subject to the conditions
hereof, each of the parties hereto agrees to use its commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement,
including without limitation (i) the obtaining of all necessary consents,
approvals or waivers from third parties, and (ii) the execution and delivery of
any additional instruments necessary to consummate the transactions contemplated
by, and to fully carry out the purposes of, this Agreement, but which are not
inconsistent with this Agreement.
12.13 No Partnership. This Agreement does not and shall not be construed
to create a partnership, joint venture or any other relationship between the
parties hereto except the relationship of seller and buyer specifically
established hereby.
12.14 Time of Essence. Time is of the essence with respect to every
provision hereof.
12.15 Press Releases. Each Seller, on the one hand, and Purchaser, on the
other hand, hereby covenants that (i) prior to the Closing it shall not issue
any press release or public statement with respect to the transactions
contemplated by this Agreement without the prior consent of the other parties
hereto, except to the extent required by law or the regulations of the
Securities and Exchange Commission or stock exchange, and (ii) after the
Closing, any press release issued by any Seller or Purchaser shall be subject to
the review and approval of all such parties (which approval shall not be
unreasonably withheld). Purchaser hereby represents to Sellers that Purchaser
has the right under the SHC Agreement to approve press releases relative to the
transaction contemplated thereby except to the extent as required by law or the
regulations of the Securities and Exchange Commission or Stock Exchange.
Purchaser hereby agrees that Purchaser shall obtain Seller's prior approval of
such press releases prior to giving such approval to SHC. Purchaser further
agrees that there will be no changes to the SHC Press Release to be issued in
connection with the execution of this Agreement, a copy of which has been
heretofore been provided to and approved by Sellers.
12.16 Signatory Exculpation. The individual signatories for the parties
hereto are executing this Agreement in their capacities as representatives of
such parties and not individually and, therefore, shall have no personal or
individual liability of any kind or nature in connection with the execution of
this Agreement and the documents contemplated by it.
12.17 Rules of Construction. The following rules shall apply to the
construction and interpretation of this Agreement, unless otherwise indicated by
the context:
(a) Singular words shall connote the plural number as well as the
singular and vice versa, and the masculine shall include the feminine and the
neuter.
41
(b) All references herein to particular articles, sections,
subsections, clauses or exhibits are references to articles, sections,
subsections, clauses or exhibits of this Agreement.
(c) References to "including" shall mean "including without
limitation".
(d) The table of contents and headings contained herein are solely
for convenience of reference and shall not constitute a part of this Agreement
nor shall they affect its meaning, construction or effect.
(e) Each party hereto and its counsel have reviewed and revised
(or requested revisions of) this Agreement and have participated in the
preparation of this Agreement, and therefore any usual rules of construction
requiring that ambiguities are to be resolved against a particular party shall
not be applicable in the construction and interpretation of this Agreement or
any exhibits hereto.
12.18 No Recording. Neither this Agreement nor any memorandum hereof, or
any other instrument intended to give notice hereof (or which actually gives
notice hereof) shall be recorded, other than upon and to give public notice of
the filing of an action for specific performance of this Agreement pursuant to
Section 10.2(a).
12.19 No Recourse. Notwithstanding anything contained herein to the
contrary or any rights of Purchaser at law or in equity, in the event of any
default or breach by Sellers under this Agreement, Purchaser's remedies (in
addition to being subject to the limitations set forth in Article X) shall in
all events be restricted to enforcement of its rights against the property and
assets of Sellers and no recourse shall be had to any of the partners, members
or shareholders of Sellers personally or to any property and assets of any of
the members, partners or shareholders of Sellers.
12.20 Survival. The provisions of this Article XII shall survive Closing.
All of the representations and warranties and covenants of the parties contained
in this Agreement shall not survive the Closing and shall merge into the Closing
Documents, unless otherwise expressly provided in this Agreement. Upon Closing,
any breach or default of any such representations or warranties or covenants
that do not expressly survive the Closing, whether known or unknown, shall be
deemed waived by proceeding to Closing.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
in their names by their respective duly authorized representatives.
SELLERS:
CNL HOSPITALITY PARTNERS, LP, a Delaware
limited partnership
By: /s/ Xxxxxx Xxxxxxx
----------------------------
Name: Xxxxxx Xxxxxxx
Title: Senior Vice President
CNL KSL PARTNERS GP, LLC, a Delaware
limited liability company
By: /s/ Xxxxxx Xxxxxxx
----------------------------
Name: Xxxxxx Xxxxxxx
Title: Senior Vice President
CNL ROSE SPE TENANT CORP., a Delaware
corporation
By: /s/ Xxxxxx Xxxxxxx
----------------------------
Name: Xxxxxx Xxxxxxx
Title: Senior Vice President
43
RFS LEASING VII, INC., a Tennessee
corporation
By: /s/ Xxxxxx Xxxxxxx
----------------------------
Name: Xxxxxx Xxxxxxx
Title: Senior Vice President
44
PURCHASER:
KSL RECREATION HOLDINGS I, LLC, a
Delaware limited liability company
By:KKR MILLENIUM FUND L.P.,
Managing Member
By: KKR ASSOCIATES MILLEMINUM
L.P., its General Partner
By: KKR ASSOCIATES MILLENIUM GP
LLC, its General Partner
By: /s/ Authorized Signatory
Name:
Title: Member
By: KKR PARTNERS III, L.P.,
Member
By: KKR III GP, LLC
its General Partner
By: /s/ Authorized Signatory
Name:
Title: Member
KSL RECREATION MANAGEMENT
OPERATIONS, LLC, a Delaware limited
liability company
By: KSL RECREATION
MANAGEMENT CORPORATION,
Managing Member
By: /s/ Authorized Signatory
Name:
Title:
45
JOINDER BY ESCROW AGENT
First American Title Insurance Company, as Escrow Agent, acknowledges
receipt of the Agreement and consents to and agrees to be bound thereby.
DATED this _____ day of October, 2005.
First American Title Insurance Company
By:________________________________
Name:______________________________
Title:_____________________________
46
EXHIBIT A
HOTEL LEGAL DESCRIPTION
X-0
XXXXXXX X
XXXXX XXXXX XXXXX DESCRIPTION
B-1
EXHIBIT C
FINANCIAL STATEMENTS
C-1
EXHIBIT D
FIRPTA CERTIFICATE
D-1
EXHIBIT E
HDC INTEREST ASSIGNMENT
E-1
EXHIBIT F
NORTH BEACH PLAN AND BUDGET
F-1
EXHIBIT G
SHC AGREEMENT
G-1
EXHIBIT H
NON-IMPUTATION AFFIDAVIT
H-1
