AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

FILLMORE CCA HOLDINGS, INC.

CLUBCORP ACQUISITION CORPORATION

and

CLUBCORP, INC.

Dated as of October 9, 2006

Table of Contents

 

 

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iii

LIST OF EXHIBITS AND ANNEXES

 

 

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AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER, dated as of October 9, 2006 (this “ Agreement ”), by and among Fillmore CCA Holdings, Inc., a Delaware corporation (“ Parent ”), ClubCorp Acquisition Corporation, a Delaware corporation and a direct wholly owned subsidiary of Parent (“ Merger Sub ”), and ClubCorp, Inc., a Delaware corporation (the “ Company ”).

WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the Company have each approved and declared advisable this Agreement and the merger of Merger Sub with and into the Company (the “ Merger ”) upon the terms and subject to the conditions set forth herein and in accordance with the General Corporation Law of the State of Delaware (the “ DGCL ”); and

WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the Company have each determined that the Merger is in furtherance of and consistent with their respective business strategies and is fair to, and in the best interest of, their respective stockholders; and

WHEREAS, Parent and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also prescribe to various conditions to the Merger; and

WHEREAS, the Company has entered into that certain Interest Purchase Agreement, dated as of September 12, 2006, as amended by that certain Amendment to Interest Purchase Agreement, dated as of the date hereof, by and among Putterboy, Ltd. (“ Putterboy ”), ClubCorp, Inc., The Pinehurst Company and Bahram Shirazi, as ClubCorp Stockholders’ Representative (the “ Pinehurst Acquisition Agreement ”); and

WHEREAS, as a condition to, and simultaneously with, the execution of this Agreement, Parent is entering into a Voting Agreement (the “ Voting Agreement ”) with the Specified Stockholders, pursuant to which each Specified Stockholder has agreed, among other things, to vote or cause to be voted in favor of the adoption of this Agreement all shares of Company Common Stock beneficially owned by such Specified Stockholder in accordance with and subject to the terms set forth in the Voting Agreement;

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement and intending to be legally bound hereby, the parties hereto agree as follows:

ARTICLE 1

Defined Terms

For purposes of this Agreement, the term:

“ Acquisition Proposal ” means any agreement, offer or proposal, including any proposal from or to the Company’s stockholders relating to or involving (i) any direct or indirect acquisition or purchase from the Company or Company Subsidiaries or any acquisition by any Person or Group of more than a 15% interest in the total outstanding Voting Securities of the Company or more than a 15% interest in the total outstanding Voting Securities of Company Subsidiaries owning a Material Business or any tender offer or exchange offer, recapitalization, share exchange or reorganization that if consummated would result in any Person or Group Beneficially Owning 15% or more of the total outstanding Voting Securities of the Company or 15% or more of the total outstanding Voting Securities of Company Subsidiaries owning a Material Business, (ii) any merger, consolidation, business combination or similar transaction involving the Company or Company Subsidiaries owning a Material Business, or (iii) any

sale, lease, mortgage, pledge, exchange, transfer, license, acquisition or disposition of 15% or more of the consolidated assets of the Company and the Company Subsidiaries in any single transaction or series of related transactions (other than in the ordinary course of business); provided, however, the term Acquisition Proposal does not include (w) this Agreement, (x) the Merger, (y) any other offer or proposal by Parent to acquire the businesses and operations contemplated by this Agreement or (z) any offer or proposal to acquire assets or capital stock of Pinehurst Resort and Country Club by Putterboy or its Affiliates pursuant to the Pinehurst Acquisition Agreement.

“ Affiliate ” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with, such first Person. For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities, by contract or otherwise.

“ Agreement ” has the meaning set forth in the preamble.

“ Alternate Termination Fee ” has the meaning set forth in Section 8.2(c)

“ Antitrust Laws ” has the meaning set forth in Section 6.6(c).

“ Approval of the Minority ” means the approval of this Agreement by the holders of a majority of the shares of outstanding Company Common Stock Beneficially Owned or held of record by the Minority Stockholders.

“ Arbitration ” has the meaning set forth in Section 6.19(h).

“ Beneficial Ownership ” has the meaning used in Rule 13d-3 promulgated by the SEC under the Exchange Act.

“ Blue Sky Laws ” means state securities or “blue sky” laws.

“ Business Day ” has the meaning used in Rule 14d-1(g) promulgated by the SEC under the Exchange Act.

“ CC ESOP ” means the ClubCorp, Inc. Employee Stock Ownership Plan, as amended.

“ CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended.

“ Certificate of Merger ” has the meaning set forth in Section 2.3.

“ Certificates ” has the meaning set forth in Section 3.6(a)(i).

“ Closing ” has the meaning set forth in Section 2.2.

“ Closing Date ” has the meaning set forth in Section 2.2.

“ Closing S&U Calculation ” has the meaning set forth in Section 3.4(a).

“ Club Documents ” has the meaning set forth in Section 4.16(i).

 

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“ ClubCorp Severance Plans ” means the ClubCorp, Inc. Change of Control Severance Plan, effective June 1, 2006, the ClubCorp Severance Plan, amended and restated August 25, 2006, and the ClubCorp, Inc. Club Severance Plan, amended and restated August 25, 2006, each as in effect on the date hereof.

“ COBRA ” has the meaning set forth in Section 4.8(b).

“ Code ” means the United States Internal Revenue Code of 1986, as amended.

“ Closing Date Merger Consideration ” shall have the meaning set forth in Section 3.6(b).

“ Company ” has the meaning set forth in the preamble.

“ Company Balance Sheet ” has the meaning set forth in Section 4.6(b).

“ Company Balance Sheet Date ” has the meaning set forth in Section 4.6(b).

“ Company Benefit Plans ” means (i) all employee benefit plans within the meaning of Section 3(3) of ERISA, (ii) all stock option, stock purchase, phantom stock, stock appreciation right, supplemental retirement, severance, sabbatical, employee relocation, cafeteria benefit (Section 125 of the Code), dependent care (Section 129 of the Code), life insurance or accident insurance plans, programs or arrangements, (iii) all bonus, pension, profit sharing, savings, retirement, deferred compensation or incentive plans, programs or arrangements and (iv) other fringe or employee benefit plans, programs or arrangements that apply to senior management and that do not generally apply to all employees, in each case under clauses (i) through (iv), under which (x) any current or former employee or director of the Company or any of its Subsidiaries has any present or future right to benefits and which are sponsored, established, maintained, entered into, contributed to, or required to be contributed to by the Company or any of its Subsidiaries, or (y) the Company or any of the Company Subsidiaries has any liability (actual or contingent), excluding any liability arising solely under a management contract of the Company or a Company Subsidiary.

“ Company Board ” means the Board of Directors of the Company.

“ Company Board Recommendation ” has the meaning set forth in Section 4.3(c).

“ Company Common Stock ” means the common stock, par value $0.01 per share, of the Company.

“ Company Disclosure Letter ” has the meaning set forth in the preamble to ARTICLE 4.

“ Company Environmental Response Notice ” has the meaning set forth in Section 6.21(c).

“ Company Financial Statements ” has the meaning set forth in Section 4.6(b).

“ Company IP Rights ” means material Intellectual Property used in the conduct of the business of the Company and the Company Subsidiaries as currently conducted.

“ Company Option ” means any option granted, and not exercised, expired or terminated, to a current or former employee, director or independent contractor of the Company or any of the Company Subsidiaries or any predecessor thereof to purchase shares of Company Common Stock pursuant to any Company Stock Option Plan.

 

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“ Company-Owned IP Rights ” means Company IP Rights that are owned or licensed exclusively by the Company or any of the Company Subsidiaries.

“ Company Paid Cure Defects ” has the meaning set forth in Section 6.19(f).

“ Company Permits ” has the meaning set forth in Section 4.5(a).

“ Company Merger Bonus Plan ” has the meaning set forth in Section 3.8.

“ Company PCA Response Notice ” has the meaning set forth in Section 6.20(c).

“ Company Preferred Stock ” has the meaning set forth in Section 4.2(a).

“ Company Registered Intellectual Property ” means all United States, international and foreign (i) patents and patent applications (including provisional applications), (ii) registered service marks and trademarks, and, applications to register service marks and trademarks, (iii) registered Internet domain names and (iv) registered copyrights and applications for copyright registration, in each case of (i) through (iv) that is owned by the Company or any of the Company Subsidiaries and which have not expired.

“ Company SEC Reports ” has the meaning set forth in Section 4.6(a).

“ Company Stockholders Approval ” has the meaning set forth in Section 4.3(a).

“ Company Stockholders Meeting ” has the meaning set forth in Section 4.3(a).

“ Company Stock Option Plans ” means the Company’s 2001 Executive Stock Option Plan, as amended or restated, and the ClubCorp, Inc. Omnibus Stock Plan, as amended or restated.

“ Company Subsidiary ” has the meaning set forth in Section 4.1(a).

“ Company Title Response Notice ” has the meaning set forth in Section 6.19(g).

“ Company Warrants ” means warrants to purchase shares of Company Common Stock.

“ Confidentiality Agreement ” has the meaning set forth in Section 6.3.

“ Continuing Employee ” has the meaning set forth in Section 6.9(a).

“ Contract ” means any agreement, contract, subcontract, lease, sublease, note, loan, evidence of Indebtedness, letter of credit, covenant not to compete, obligation, indenture or option, whether oral or written.

“ Cypress ” means, collectively, Cypress Merchant Banking Partners L.P., Cypress Golf Ltd., Cypress Merchant Banking Partners II L.P., Cypress Golf C.V. Ltd. and 55 ^th Street Partners II L.P.

“ Debt Financing Commitments ” has the meaning set forth in Section 5.5.

“ Defects ” has the meaning set forth in Section 6.22(a).

“ Defect Amount ” has the meaning set forth in Section 6.22(a).

 

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“ Defect Reduction Amount ” has the meaning set forth in Section 6.22(b).

“ Debt Financing Commitments ” has the meaning set forth in Section 5.5.

“ DGCL ” has the meaning set forth in the preamble.

“ Dissenting Shares ” has the meaning set forth in Section 3.10.

“ D&O Insurance ” has the meaning set forth in Section 6.8(b).

“ Effective Time ” has the meaning set forth in Section 2.3.

“ Encumbrance ” means, with respect to any asset, any mortgage, deed of trust, lien, pledge, charge, security interest, title retention device, conditional sale or other security arrangement, collateral assignment, claim, adverse claim of title, ownership or other similar encumbrance of any kind in respect of such asset (including any restriction on (i) the voting of any security or the transfer of any security or other asset, (ii) the receipt of any income derived from any asset, and (iii) the use of any asset), other than any encumbrance arising (A) by reasons of restrictions on transfers under federal, state and foreign securities Laws or (B) under applicable Laws with respect to Taxes not yet due and payable.

“ Engagement Letter ” has the meaning set forth in Section 4.15.

“ Environmental Defect ” has the meaning set forth in Section 6.21(b).

“ Environmental Defect Payments ” has the meaning set forth in Section 6.21(b).

“ Environmental Laws ” means all foreign, federal, state, and local laws (including common law), statutes, all rules or regulations promulgated thereunder, and all orders, consent orders, judgments, permits, registrations, approvals, exemptions or notifications issued, promulgated or entered pursuant thereto, relating to pollution or protection of the environment or of human health (but not including employee health and safety matters).

“ Environmental Loss Amount Data ” has the meaning set forth in Section 6.21(d).

“ Environmental Loss Value ” has the meaning set forth in Section 6.21(b).

“ Environmental Objection Notice ” has the meaning set forth in Section 6.21(b).

“ Environmental Reports ” means written reports, audits inspections, or similar documents, in each case that are material and in the possession or control of the Company or any Company Subsidiary regarding any issues of compliance with or liability under applicable Environmental Laws (including with respect to the environmental conditions of the Facilities).

“ Equity Interest ” means any share, capital stock, partnership, member or similar interest in any Person, and any option, warrant, right or security (including debt securities) convertible, exchangeable or exercisable therefor.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.

 

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“ ERISA Affiliate ” means any entity or trade or business (whether or not incorporated), that together with the Company or any of the Company Subsidiaries is considered under common control and treated as a single employer under Sections 414(b), (c), (m) or (o) of the Code.

“ Escrow Agent ” has the meaning set forth in Section 3.3.

“ Estimated Merger Consideration ” has the meaning set forth in Section 3.2.

“ Estimated S&U Calculation ” has the meaning set forth in Section 3.2.

“ Evaluation Time ” has the meaning set forth in Section 4.6(d).

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the SEC thereunder.

“ Exchange Agent ” has the meaning set forth in Section 3.6(b).

“ Exchange Fund ” has the meaning set forth in Section 3.6(b).

“ Expenses ” includes all reasonable, documented out-of-pocket expenses (including all reasonable fees and expenses of legal counsel, accountants, investment bankers, experts and consultants to a party hereto and its Affiliates) incurred by a party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement and the transactions contemplated hereby, including the solicitation of stockholder approvals and all other matters related to the transactions contemplated hereby.

“ Facilities ” means all plants, offices, manufacturing facilities, stores, warehouses, administration buildings and real property and related facilities and fixtures currently or formerly owned or leased by the Company or any of the Company Subsidiaries.

“ Fiduciary Insurance ” has the meaning set forth in Section 6.8(b).

“ Final Closing S&U Calculation ” has the meaning set forth in Section 3.4(d).

“ Financing ” has the meaning set forth in Section 5.5.

“ GAAP ” means generally accepted accounting principles as applied in the United States.

“ Governmental Entity ” means any supranational, national, state, municipal, local or foreign government, any court, tribunal, arbitrator, administrative agency, commission or other governmental official, authority or instrumentality, in each case whether domestic or foreign, any stock exchange or similar self-regulatory organization or any quasi-governmental or private body exercising any regulatory, Taxing or any other governmental or quasi-governmental entity.

“ Group ” has the meaning as used in Section 13 of the Exchange Act, except where the context otherwise requires.

“ Hazardous Substances ” means any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products, polychlorinated biphenyls, urea-formaldehyde insulation, asbestos, or radioactive materials and any “solid waste,” “waste,” “hazardous substances,” “pollutants,” “contaminants,” “petroleum,” “natural gas liquids” or terms of similar import as those terms are defined in any applicable Environmental Law (including as defined in Section 101 of CERCLA).

 

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“ HLHZ ” has the meaning set forth in Section 4.14.

“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder.

“ Indebtedness ” means, with respect to any Person, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (iii) all obligations of such Person upon which interest charges are customarily paid, (iv) all obligations of such Person under conditional sale or other title retention agreements relating to property purchased by such Person, (v) all obligations of such Person issued or assumed as the deferred purchase price of property (excluding obligations of such Person to creditors for raw materials, inventory and supplies incurred in the ordinary course of such Person’s business), (vi) all capitalized lease obligations or other long-term obligations classified as indebtedness of such Person under GAAP, consistent with classifications in the Company Balance Sheet, (vii) all obligations of others secured by any Encumbrance on property or assets owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (viii) all obligations of such Person under interest rate, currency swap transactions or other interest rate or exchange rate hedging agreements (valued at the termination value thereof), (ix) all letters of credit issued for the account of such Person, (x) all obligations of such Person to purchase securities (or other property) that arise out of or in connection with the sale of the same or substantially similar securities or property, (xi) any accrued interest, prepayment penalties or fees, any premiums, any breakage amounts or any other similar amounts payable in connection with the foregoing and (xii) all guarantees and arrangements having the economic effect of a guarantee of such Person of any indebtedness of any other Person.

“ Indemnified Party ” has the meaning set forth in Section 6.8(a).

“ Independent Accountant ” has the meaning set forth in Section 3.4(c).

“ Intellectual Property ” means any and all worldwide industrial and intellectual property rights, including all: (i) patents and patent applications, (ii) trademarks, service marks, trade dress, logos, corporate names, trade names and Internet domain names together with the goodwill associated with any of the foregoing, (iii) copyrights and works of authorship in any media, including software, marketing materials, Internet site content and (iv) trade secrets.

“ IRS ” means the United States Internal Revenue Service.

“ Knowledge ” means (i) with respect to the Company and/or any Company Subsidiary, the actual knowledge (after reasonable inquiry) of a fact, circumstance, event or other matter by the Chairman of the Board, Chief Executive Officer, Chief Financial Officer or General Counsel of the Company and (ii) with respect to any other Person, the actual knowledge (after reasonable inquiry) of a fact, circumstance, event or other matter by the officers and directors of such Person. Notwithstanding the foregoing, “after reasonable inquiry” shall not require sampling, analysis or other similar investigation related to Environmental Laws or Hazardous Substances. For the purposes of Section 4.6, “Knowledge” shall also include the actual knowledge (after reasonable inquiry) of a fact, circumstance, event or other matter of Angela Stephens, Kevin Kohutek and, for the purposes of Section 4.13, “Knowledge” shall also include the actual knowledge (after reasonable inquiry) of a fact, circumstance, event or other matter of Harry Moulter.

“ Law ” means any foreign or domestic federal, state, provincial, local, municipal or other law, statute, code, treaty, ordinance, rule, regulation, legal doctrine, order, permit, judgment, writ, stipulation, award, injunction, decree or arbitration award or finding.

 

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“ Lease Documents ” has the meaning set forth in Section 4.16(f).

“ Leased Golf Property ” means the Leased Properties identified as a golf property in Section 4.16(f) of the Company Disclosure Letter.

“ Leased Properties ” has the meaning set forth in Section 4.16(f).

“ Liquor Licenses ” has the meaning set forth in Section 6.15.

“ Loan Agreements ” means (i) that certain Loan Agreement dated as of June 2, 2003 by and among Timarron Golf Club, Inc., Crow Canyon Management Corp., Northwood Management Corp. and Treesdale Country Club, Inc. and GMAC Commercial Mortgage Corporation, (ii) that certain Loan Agreement dated as of June 2, 2003 by and among Diamond Run Club, Inc., Greenbrier Country Club, Inc., Shadow Ridge Golf Club, Inc., Bay Oaks Country Club, Inc. and Woodside Plantation Country Club, Inc. and GMAC Commercial Mortgage Corporation, (iii) that certain Loan Agreement dated as of June 2, 2003 by and among Pacific Life Insurance Company and The Country Club Loan Parties Named therein, (iv) that certain Loan Agreement dated as of June 2, 2003 by and among Pacific Life Insurance Company and The Resort Loan Parties Named therein, (v) that certain Loan Agreement dated as of June 4, 2003 by and among Textron Financial Corporation, ClubCorp, Inc. and each of the affiliates of ClubCorp, Inc. signatory thereto, (vi) the evidences of indebtedness listed on Section 4.9(4) of the Company Disclosure Letter, and (vii) in the case of clauses (i) through (vi) above, all amendments, modifications or supplements thereto.

“ Losses ” has the meaning set forth in Section 6.8(a).

“ Loss Value ” has the meaning set forth in Section 6.19(e).

“ Material Adverse Effect ” means any effect, event, occurrence, development, circumstance, change or condition (each an “ Effect ”) that is materially adverse to the assets, business, financial condition or results of operations of the Company and the Company Subsidiaries, taken as a whole, except to the extent that such Effect results from (i) changes or conditions affecting economic or capital markets in the United States or internationally, (ii) changes or conditions affecting the industries in which the Company or any Company Subsidiary operates other than any such Effects that have had an adverse and disproportionate effect on the Company and the Company Subsidiaries, taken as a whole, as compared to comparable participants in the industries in which the Company and the Company Subsidiaries conduct their business, (iii) changes in any Laws or GAAP or the accounting rules and regulations of the SEC, (iv) the announcement of this Agreement or the transactions contemplated hereby or of the identity of Parent, (v) any action or failure to act by Parent or any of its Affiliates, or (vi) any actions required under this Agreement to obtain any authorization or approval under applicable antitrust or competition laws for the consummation of the transactions contemplated by this Agreement.

“ Material Business ” means (i) a business that constitutes 10% or more of the net revenues, net income or the assets (including Voting Securities or other Equity Interests) of the Company and the Company Subsidiaries, taken as a whole and (ii) the business of Pinehurst Resort and Country Club.

“ Material Contract ” has the meaning set forth in Section 4.9(a).

“ Material Environmental Condition ” means, with respect to any Property, any condition, defect, Encumbrance, Hazardous Substance or toxic mold on such Property or any Facilities currently owned by the Company or the Company Subsidiaries and relating to such Property that (A) is not in compliance with Environmental Law in the relevant jurisdiction and (B) that would, in the ordinary course of business

 

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consistent with past practice, be recommended to be repaired, replaced or abated within 12 months, in each case except for conditions, defects, Encumbrances, Hazardous Substances and toxic molds (i) specifically identified in the Environmental Reports listed in Section 4.11 of the Company Disclosure Letter or (ii) disclosed on Section 4.11 or Section 6.21 of the Company Disclosure Schedule.

“ Material PCA Condition ” means, with respect to any Property, any condition, defect or Encumbrance on such Property or any Facilities currently owned by the Company or the Company Subsidiaries and relating to such Property that (A) is not in compliance with applicable Law (excluding Environmental Laws) in the relevant jurisdiction or (B) is not in reasonably good operating condition and repair (normal wear and tear excepted) and that would, in the ordinary course of business consistent with past practice, be recommended to be repaired, replaced or abated within 12 months, in each case except for conditions, defects or Encumbrances (i) at Properties that are specifically addressed in the Company’s Maintenance Capital Expenditures budget for fiscal 2007 that has been provided to Parent prior to the date hereof or which in the ordinary course of business consistent with past practice be substituted for a matter specifically identified in such budget, (ii) that would constitute replacement of substantially all of any building or Facility, including but not limited to buildings at Brookhaven and Kingwood, or (iii) disclosed on Section 6.20 of the Company Disclosure Schedule.

“ Merger ” has the meaning set forth in the preamble.

“ Merger Bonus ” has the meaning set forth in Section 3.8.

“ Merger Consideration ” means $14.50 per share of Company Common Stock, as adjusted pursuant to the amount calculated in accordance with Annex A and Article 3 hereto.

“ Merger Consideration Adjustment ” has the meaning set forth in Section 3.5(a).

“ Merger Consideration Escrow Amount ” has the meaning set forth in Section 3.3.

“ Merger Sub ” has the meaning set forth in the preamble.

“ Minority Stockholders ” shall mean, as of any date, all the stockholders of the Company on such date, excluding those stockholders listed on Annex B hereof.

“ Notice of Dispute ” has the meaning set forth in Section 3.4(b).

“ Notice of Superior Offer ” has the meaning set forth in Section 6.4(c).

“ Owned Properties ” has the meaning set forth in Section 4.16(a).

“ Parent ” has the meaning set forth in the preamble.

“ Parent Material Adverse Effect ” means any Effect that is materially adverse to the assets, business, financial condition or results of operations of the Parent and the Parent Subsidiaries, taken as a whole, except to the extent that such Effect results from (i) changes or conditions affecting economic or capital markets in the United States or internationally, (ii) changes or conditions affecting the industries in which the Parent operates other than any such Effects that have had an adverse and disproportionate effect on Parent and the Parent Subsidiaries, taken as a whole, as compared to comparable participants in the industries in which Parent and the Parent Subsidiaries conduct their business, (iii) changes in any Laws or GAAP or the accounting rules and regulations of the SEC, (iv) the announcement of this Agreement or the transactions contemplated hereby or the identity of Parent, (v) any action or failure to act by Company

 

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or any of its Affiliates, or (vi) any actions required under this Agreement to obtain any authorization or approval under applicable antitrust or competition laws for the consummation of the transactions contemplated by this Agreement.

“ Parent Obtained Environmental Reports ” has the meaning set forth in Section 6.21(a).

“ Parent Subsidiary ” has the meaning set forth in Section 5.1.

“ Parent’s Operator ” has the meaning set forth in Section 6.15.

“ PBGC ” has the meaning set forth in Section 4.8(f).

“ PCA Defect ” has the meaning set forth in Section 6.20(b).

“ PCA Defect Payments ” has the meaning set forth in Section 6.20(b).

“ PCA Loss Amount Data ” has the meaning set forth in Section 6.20(d).

“ PCA Loss Value ” has the meaning set forth in Section 6.20(b).

“ PCA Objection Notice ” has the meaning set forth in Section 6.20(b).

“ PCA Reports ” has the meaning set forth in Section 6.20(a).

“ Per Share Closing Date Merger Consideration ” means the product obtained by dividing the Closing Date Merger Consideration by the number of outstanding shares of Company Common Stock on the Closing Date.

“ Permitted Exceptions ” has the meaning set forth in Section 4.16(a).

“ Person ” means an individual, corporation, limited liability company, partnership (limited, general or otherwise), association, trust, business trust, unincorporated organization, or other entity or group.

“ Pinehurst Acquisition Agreement ” has the meaning set forth in the preamble.

“ Pinehurst Sale ” has the meaning set forth in Section 7.1(e).

“ Pinehurst Subsidiaries ” means Pinehurst, Inc., Pinehurst Championship Management, Inc., Pinehurst Country Club, Inc., ClubCorp Realty East, Inc., PCC Realty Corp., Pinehurst Acquisition Corp., Pinehurst Realty Corp. and Pinehurst No. VII, Inc.

“ Post-Closing Specified Properties ” has the meaning set forth in Section 3.5(c).

“ Post-Signing Returns ” has the meaning set forth in Section 6.14(a).

“ Proceeding ” has the meaning set forth in Section 6.8(a).

“ Professional Fees ” means all fees and expenses of all attorneys, accountants, investment bankers and other advisors and agents for the Company or the CC ESOP (“ Advisors ”) for services rendered in connection with this Agreement and the transactions contemplated hereby, regardless of which party paid such fees, including fees and expenses of Advisors arising out of or relating to the discussion, evaluation, negotiation and documentation of the transactions contemplated hereby.

 

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“ Proxy Statement ” has the meaning set forth in Section 6.5(a).

“ Putterboy ” has the meaning set forth in the preamble.

“ Qualified Plan ” has the meaning set forth in Section 4.8(b).

“ Real Properties ” has the meaning set forth in Section 4.16(f).

“ Release ” means any releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, disposing or dumping.

“ Representatives ” means an entity’s directors, officers, employees, Affiliates, accountants, consultants, legal counsel, advisors, investment bankers, brokers, potential financing sources, placement agents, representatives of financing sources, agents and other representatives.

“ Resolution Period ” has the meaning set forth in Section 3.4(b).

“ Restraint ” has the meaning set forth in Section 7.1(b).

“ SEC ” means the Securities and Exchange Commission.

“ Secretary of State ” has the meaning set forth in Section 2.3.

“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated by the SEC thereunder.

“ Settlement Agreement ” has the meaning set forth in Section 4.9(a)(12).

“ SOXA ” means the Sarbanes-Oxley Act of 2002.

“ Specified Contracts ” means the Contracts required to be identified in Sections 4.8(a), 4.8(j), 4.16(f), 4.16(i) and 4.20(a) of the Company Disclosure Letter, in each case together with all exhibits and schedules thereto.

“ Specified Property Dispositions ” means the pending dispositions of the properties designated as such as set forth on Annex A.

“ Specified Stockholders ” means the collective references to each of the Persons who are listed on Annex C hereto.

“ Stockholders Agreement ” means the Stockholders Agreement, dated as of December 1, 1999, among the Company and the stockholders of the Company named therein.

“ Stockholders’ Representative ” has the meaning set forth in Section 9.14(a).

“ Subsidiary ” of a specified entity means any corporation, partnership, limited liability company, joint venture or other entity of which the specified entity (either alone or through or together with any other subsidiary) owns, directly or indirectly, 50% or more of the stock or other equity or partnership interests.

 

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“ Superior Offer ” means, with respect to the Company, an unsolicited, bona fide written offer made by a third party for an Acquisition Proposal (except that references to “15%” in clauses (i) and (iii) of the definition of “Acquisition Proposal” shall be deemed to be a reference to “50%”) on terms that the Company Board has in good faith concluded (after consultation with its outside legal counsel and its financial advisor), taking into account, among other things, all legal, financial, regulatory and other aspects of the offer and the Person making the offer, to be more favorable to the Company’s stockholders (in their capacities as stockholders) from a financial point of view than those contemplated by this Agreement (including any proposed alterations to this Agreement submitted in writing by Parent in response thereto) and is reasonably capable of being consummated without undue delay.

“ Surveys ” has the meaning set forth in Section 6.19(b).

“ Survey Objection Notice ” has the meaning set forth in Section 6.19(d).

“ Surviving Corporation ” has the meaning set forth in Section 2.1.

“ Taxes ” means (i) all taxes, levies, assessments, duties, imposts or other like assessments, charges or fees (including estimated taxes, charges and fees), including income, profits, gross receipts, transfer, excise, property, sales, use value-added, ad valorem, license, capital, wage, employment, payroll, withholding, social security, severance, occupation, import, custom, stamp, alternative, add-on minimum, environmental, franchise or other governmental taxes or charges, imposed by any Governmental Entity responsible for the imposition of any such tax (each, a “ Tax Authority ”), including any interest, penalties or additions to tax applicable or related thereto, whether disputed or not, (ii) all liability for the payment of any amounts of the type described in clause (i) as the result of being (or ceasing to be) a member of an affiliated, consolidated, combined or unitary group (or being included (or required to be included) in any Tax Return related thereto), and (iii) all liability for the payment of any amounts as a result of an express or implied obligation to indemnify or otherwise assume or succeed to the liability of any other Person with respect to the payment of any amounts of the type described in clause (i) or clause (ii).

“ Tax Return ” means any report, return, statement, declaration, claim for refund, information return or other written information (including any related or supporting schedules, statements or information and amended returns) filed or required to be filed in connection with any Taxes, including the administration of any Laws, regulations or administrative requirements relating to any Taxes.

“ Termination Date ” has the meaning set forth in Section 8.1(b).

“ Termination Fee ” has the meaning set forth in Section 8.2(b).

“ Third Party Reports ” means any third party reports, audits, inspections or similar documents, including relating to compliance with or liabilities under Environmental Laws, title, property condition assessment, seismic analysis, zoning and survey.

“ Title Commitments ” has the meaning set forth in Section 6.19(a).

“ Title Company ” has the meaning set forth in Section 6.19(a).

“ Title Defect ” has the meaning set forth in Section 6.19(d).

“ Title Defect Payments ” has the meaning set forth in Section 6.19(f).

“ Title Loss Amount Data ” has the meaning set forth in Section 6.19(h).

 

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“ Title Objection Notice ” has the meaning set forth in Section 6.19(d).

“ Title Policies ” has the meaning set forth in Section 6.19(c).

“ Uncured Environmental Defects ” has the meaning set forth in Section 6.21(c).

“ Uncured PCA Defects ” has the meaning set forth in Section 6.20(c).

“ Uncured Title Defects ” has the meaning set forth in Section 6.19(g).

“ Unpaid Company Cure Defects ” has the meaning set forth in Section 6.19(f).

“ Voting Agreement ” has the meaning set forth in the preamble.

“ Voting Security ” means any share, capital stock, partnership, member or similar interest in any Person entitling the holder thereof to vote for the election of directors or persons performing similar functions.

“ WARN Act ” has the meaning set forth in Section 4.8(n).

“ Warrant Termination Agreement ” has the meaning set forth in Section 3.7(b).

ARTICLE 2

The Merger

2.1 The Merger . Upon the terms and subject to satisfaction or waiver of the conditions set forth in this Agreement, and in accordance with the DGCL, Merger Sub, at the Effective Time, shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation of the Merger (the “ Surviving Corporation ”) and as a wholly-owned Subsidiary of Parent.

2.2 The Closing . Subject to Section 8.1(b), the closing of the transactions contemplated hereby (the “ Closing ”) shall take place at 10:00 am (EST) on the later of (i) December 26, 2006 or (ii) the fifth (5 ^th ) Business Day after the satisfaction or waiver of each of the conditions set forth in Article 7 (other than (x) the condition set forth in Section 7.1(a) if the Company Stockholders Meeting has not yet been noticed and held and (y) those conditions that by their terms are to be satisfied at Closing, but subject to the satisfaction or waiver of such condition at such time) or at such other time or date as the parties hereto agree. The Closing shall take place at the offices of Haynes and Boone, LLP, 901 Main Street, Suite 3100, Dallas, Texas, or at such other location as the parties hereto agree. The date on which the Closing occurs is herein referred to as the “ Closing Date .”

2.3 Effective Time . Subject to the provisions of this Agreement, a certificate of merger satisfying the applicable requirements of the DGCL (the “ Certificate of Merger ”) shall be duly executed by the Company, and, simultaneously with or as soon as practicable following the Closing, filed with the Secretary of State of the State of Delaware (the “ Secretary of State ”). The Merger shall become effective upon the date and time of the filing of the Certificate of Merger with the Secretary of State, or such later date and time as the Company and Parent may agree and specify in the Certificate of Merger. The date and time the Merger becomes effective is referred to in this Agreement as the “ Effective Time .”

2.4 Effect of the Merger . At the Effective Time, the effect of the Merger shall be as provided in this Agreement, the Certificate of Merger and the applicable provisions of the DGCL. Without limiting

 

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the generality of the foregoing, at the Effective Time, except as otherwise provided herein, all the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

2.5 Certificate of Incorporation; Bylaws . At the Effective Time, the Certificate of Incorporation and the Bylaws of the Surviving Corporation as in effect immediately prior to the Effective Time shall be amended so as to read in the forms of Exhibits A and B, respectively.

2.6 Directors and Officers . The directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation. The executive officers of the Company (other than the Chairman of the Board) immediately prior to the Effective Time shall be the officers of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation.

ARTICLE 3

Conversion of Securities; Merger Consideration; Exchange of Certificates

3.1 Conversion of Securities . At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or the holders of any of the following securities:

(a) Conversion Generally . Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than any shares of Company Common Stock to be canceled pursuant to Section 3.1(b) and Dissenting Shares referred to in Section 3.10) shall be converted, subject to other provisions of Section 3.1, Section 3.6(e) and Section 3.8, into the right to receive the Merger Consideration. At the Effective Time, all such shares of Company Common Stock shall no longer be outstanding and shall automatically cease to exist, and each certificate previously representing any such shares shall thereafter represent only the right to receive the Merger Consideration, subject to other provisions of this Section 3.1, Section 3.6(e) and Section 3.10.

(b) Cancellation of Treasury Stock and Parent-Owned Stock . Each share of Company Common Stock held, immediately prior to the Effective Time, in treasury of the Company, and each share owned by Parent or Merger Sub shall be canceled and extinguished without any conversion thereof, and no payment shall be made with respect thereto.

(c) Capital Stock of Merger Sub . At the Effective Time, each share of capital stock of Merger Sub that is issued and outstanding immediately prior to the Effective Time will, by virtue of the Merger and without further action on the part of the sole stockholder of Merger Sub, be converted into and become one share of common stock of the Surviving Corporation (and the shares of the Surviving Corporation into which the shares of Merger Sub capital stock are so converted shall be the only shares of the Surviving Corporation’s capital stock that are issued and outstanding immediately after the Effective Time). Each certificate evidencing ownership of shares of Merger Sub common stock will evidence ownership of such shares of common stock of the Surviving Corporation.

3.2 Estimated Closing Merger Consideration . For purposes of determining an estimate of Merger Consideration at the Effective Time, at least ten (10) Business Days prior to the Closing Date, the Company shall prepare and deliver to Parent a certificate setting forth the Company’s estimates in good faith of each of the line items contained in Annex A hereto as of the Closing (the “ Estimated S&U Calculation ”) and the estimated Merger Consideration as of the Effective Time (“ Estimated Merger Consideration ”) based on such Estimated S&U Calculation as compared to Annex A hereto, such

 

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calculation (a) to be reasonably detailed as to allow Parent to determine the components of the Company’s calculations (including the calculation of the Estimated Merger Consideration), (b) to be prepared in accordance with the accounting methods, policies, practices and procedures used to prepare the forecast used in Annex A, (c) where applicable, to be prepared in accordance with generally accepted accounting principles in the United States as in effect on the date of such preparation consistently applied in accordance with past practices and (d) otherwise to be consistent with the past practice of the Company as to accounting and reporting methods, policies, practices and procedures, with consistent classifications, judgments and estimation methodologies. If Parent objects in good faith to any of the information set forth on the Estimated S&U Calculations or accompanying components of the calculation as presented by the Company, Parent shall deliver to the Company at least five (5) Business Days prior to the Closing Date, a written notice specifying in reasonable detail all disputed items and the basis thereof and setting forth the adjustment to the Estimated Merger Consideration that the Parent believes should be made. Parent and the Company shall negotiate in good faith and attempt to agree on appropriate adjustments such that the Estimated S&U Calculation reflect as accurately as reasonably practicable the estimates of each line item on Annex A hereto as of the Closing Date. If Parent and the Company agree on appropriate adjustments, Parent shall pay to the Exchange Agent in accordance with Section 3.6(b) an amount equal to such agreed Estimated Merger Consideration less the amount required to be deposited with the Escrow Agent pursuant to Section 3.3 below.

3.3 Escrow . On or prior to the Closing Date, Parent will deposit $20.731 million (the “ Merger Consideration Escrow Amount ”) into escrow with a third party escrow agent (the “ Escrow Agent ”) for distribution in accordance with Section 3.5. The agreement with the Escrow Agent shall provide that the Escrow Agent shall be entitled to pay the Surviving Corporation up to $731,000 of the Merger Consideration Escrow Amount in the event Putterboy elects to have the Surviving Corporation purchase additional workers compensation, automobile and general liability insurance coverage prior to May 1, 2007.

3.4 Closing Merger Consideration .

(a) Delivery of Closing S&U Calculation . As promptly as practicable following the Closing Date, but in no event later than forty-five (45) days after the Closing Date, Parent shall cause the Surviving Corporation to prepare, and deliver to the Stockholders’ Representative a certificate which shall set forth each of the line items contained in Annex A hereto as of the Closing Date (the “ Closing S&U Calculation ”) and the Merger Consideration as of the Effective Time based on the Closing S&U Consideration as compared to Annex A hereto. The Closing S&U Calculation shall be prepared in form and detail comparable to, and in accordance with the accounting methods, policies, practices and procedures used to prepare the Estimated S&U Calculation. Parent shall cause the Surviving Corporation to provide the Stockholders’ Representative and its designees with reasonable cooperation and reasonable access at reasonable times to the books and records (including financial statements) of the Surviving Corporation and the personnel of the Surviving Corporation to verify the Closing S&U Calculation and the calculation of the Merger Consideration as of the Effective Time.

(b) Notice of Dispute . If the Stockholders’ Representative wishes to dispute any items of the Closing S&U Calculation (including the calculation of Merger Consideration as of the Effective Time), then the Stockholders’ Representative shall deliver to Parent, within thirty (30) days following the delivery to the Stockholders’ Representative of the Closing S&U Calculation, a written notice specifying in reasonable detail all disputed items and the basis in reasonable detail thereof and setting forth the adjustment to the Merger Consideration that the Stockholders’ Representative believes should be made (a “ Notice of Dispute ”). If Parent does not agree with a Notice of Dispute, Parent and the Stockholders’ Representative shall negotiate in good faith to resolve their differences within fifteen (15) days following delivery to Parent of such Notice of Dispute (the “ Resolution Period ”), and any resolution by them as to any disputed amounts shall be in writing and shall be final, binding and conclusive.

 

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(c) Resolution by Independent Accountant . In the event that Parent and the Stockholders’ Representative are unable to resolve all disputes with respect to the Closing S&U Calculation prior to the expiration of the Resolution Period, issues remaining in dispute shall be submitted, as soon as practicable, to the Dallas, Texas office of Ernst & Young, LLP (the “ Independent Accountant ”). Parent and the Stockholders’ Representative agree to execute a reasonable engagement letter if requested by the Independent Accountant. The _, Independent Accountant shall determine only those issues with respect to the Closing S&U Calculation (and the derivation of the Merger Consideration therefrom) which are still in dispute, except to the extent that a dispute item would or could have a direct impact on a non-disputed item. The Independent Accountant’s determination shall be made within thirty (30) days after its selection, shall be set forth in a written statement delivered to Parent and the Stockholders’ Representative and shall be final, binding and conclusive and enforceable in any court of competent jurisdiction. The fees and expenses of the Independent Accountant shall be allocated by the Independent Accountant between Parent, on the one hand, and the Stockholders’ Representative on behalf of the Company’s stockholders immediately prior to the Effective Time, on the other hand, in proportion to the extent that such party did not prevail on the items in dispute.

(d) Final Closing S&U Calculation . For purposes of this Agreement, the “ Final Closing S&U Calculation ” shall be either (i) the Closing S&U Calculation in the event that no Notice of Dispute is delivered to Parent during the 30-day period specified by Section 3.4(b) or (ii) the Closing S&U Calculation as adjusted by either (x) the agreement of the Stockholders’ Representative and Parent pursuant to Section 3.4(b) or (y) the determination of the Independent Accountant pursuant to Section 3.4(c).

3.5 Post-Closing Adjustment .

(a) “ Merger Consideration Adjustment ” shall mean the result, whether a positive or negative number, obtained by:

(1) subtracting (A) the aggregate Estimated Merger Consideration from (B) the aggregate Merger Consideration as calculated on the Final Closing S&U Calculation; and

(2) adding the proceeds received by the Company (less related costs and expenses as provided in Section 3.5(c)) in connection with any Specified Property Disposition to the extent any such Specified Property Disposition had not been consummated as of the Effective Time and is consummated prior to the date of the distribution of the Merger Consideration Escrow Amount under Section 3.5(b).

(b) If the Merger Consideration Adjustment is a positive number, the Escrow Agent shall promptly (and in any event within three (3) Business Days) pay an amount equal to such positive number to the Exchange Agent for distribution to the holders of Company Common Stock and the holders of Company Options on an as-converted basis who (i) received payments in exchange for their Company Options under Section 3.7(a) and (ii) would have received payments in exchange for their Company Options under Section 3.7(a) if the Per Share Closing Date Merger Consideration on the Closing Date included the Merger Consideration Adjustment amount on a per share basis (provided, that such holders of Company Options shall not receive more than the “in the money” value of such Company Options) (such payment to be reduced by any required withholding Taxes), in each case immediately prior to the Effective Time (including those who have previously surrendered their stock certificates) in accordance

 

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with Section 3.6(a). If the Merger Consideration Escrow Amount is less than the Merger Consideration Adjustment, Parent shall promptly (and in any event within three (3) Business Days) pay an additional amount equal to the difference between the Merger Consideration Adjustment and the Merger Consideration Escrow Amount to the Exchange Agent for distribution to the holders of Company Common Stock and the holders of Company Options on an as-converted basis, in each case immediately prior to the Effective Time. If the Merger Consideration Adjustment is a negative number, the Escrow Agent shall promptly (and in any event within three (3) Business Days) pay to Parent, in an amount equal to the absolute value of the Merger Consideration Adjustment. Any Merger Consideration Escrow Amount remaining after payment by the Escrow Agent to the Exchange Agent or Parent, as applicable, under this Section 3.5(b), shall be paid to the Exchange Agent for distribution to the holders of Company Common Stock and the holders of Company Options on an as-converted basis, in each case immediately prior to the Effective Time (including those who have previously surrendered their stock certificates) in accordance with Section 3.6(a). Parent and the Stockholders’ Representative will give joint written instructions to the Escrow Agent in accordance with these provisions.

(c) In the event any Specified Property Dispositions have not been consummated after completing the distribution of the Merger Consideration Adjustment in accordance with Section 3.5(b) (“ Post-Closing Specified Properties ”), and such Post-Closing Specified Properties are subsequently disposed of on or before the first anniversary of the Closing Date, the Surviving Corporation shall pay the Exchange Agent an amount equal to the proceeds received from the disposition of such Post-Closing Specified Property, less any costs and expenses incurred (x) in operating the Post-Closing Specified Property until the time of its disposition and (y) in connection with consummating the disposition of such Post-Closing Specified Property, for distribution in accordance with Section 3.5(b) as if such proceeds were the Merger Consideration Adjustment. Parent shall use commercially reasonable efforts to consummate the Specified Property Dispositions, including the expenditure of reasonable costs and expenses necessary to consummate such dispositions, for a price reasonably acceptable to the Stockholders’ Representative prior to the first anniversary of the Closing Date. Parent shall permit the Stockholders’ Representative to reasonably participate in the Specified Property Disposition process.

3.6 Payment and Exchange of Certificates .

(a) Exchange Procedures .

(i) Promptly after the Effective Time, Parent shall cause the Exchange Agent (as defined below) to mail to each holder of record of a certificate or certificates that immediately prior to the Effective Time represented shares of Company Common Stock (“ Certificates ”) and that at the Effective Time were, in accordance with this Article 3, converted into the right to receive the Merger Consideration (i) a letter of transmittal that shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Exchange Agent and which shall be reasonably satisfactory to the Company and (ii) instructions for use in effecting surrender by such holder of Certificates to the Exchange Agent in exchange for the Merger Consideration.

(ii) The holder of each Certificate, upon the surrender by such holder to the Exchange Agent of such Certificate, together with the letter of transmittal duly completed and validly executed by such holder in accordance with the instructions thereto, and such other documents as may reasonably be required by the Exchange Agent, shall be entitled to receive in exchange for such Certificate a check (or, if requested by such holder, a wire transfer) for the Merger Consideration into which shares of the Company Common Stock theretofore represented by such Certificate have been converted pursuant to Section 3.1, and such Certificate shall forthwith thereafter be canceled. In the event of a transfer of ownership of shares of Company

 

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Common Stock that is not registered on the transfer records of the Company, the cash consideration payable hereunder with respect to such shares of Company Common Stock may be paid to a Person other than the Person in whose name the Certificate so surrendered is registered, if such Certificate shall be properly endorsed or otherwise be in proper form for transfer. Subject to Section 3.10, each Certificate shall be deemed at all times from and after the Effective Time to represent only the right to receive, upon exchange as contemplated in this Section 3.6, the Merger Consideration into which the shares of Company Common Stock formerly represented by such Certificate are converted in the Merger. No interest shall be paid or accrue on any Merger Consideration payable upon surrender of any Certificate.

(b) Exchange Agent . At or prior to the Effective Time, Parent or a direct or indirect Subsidiary of Parent shall enter into an agreement with a bank or trust company (the “ Exchange Agent ”), which shall establish reasonable procedures (including the deposit by the Parent with the Exchange Agent of, subject to Section 3.2 hereof, the aggregate Estimated Merger Consideration less the Merger Consideration Escrow Amount (the “ Closing Date Merger Consideration ”), on or before the Effective Time) mutually acceptable to Parent and the Company for exchange in accordance with this Article 3, through the Exchange Agent, an amount of cash sufficient to deliver to the holders of Company Common Stock (other than Dissenting Shares) the aggregate Merger Consideration (such cash being hereinafter referred to as the “ Exchange Fund ”) deliverable pursuant to Section 3.1 and (if applicable) Section 3.5 in exchange for outstanding shares of Company Common Stock. The Exchange Agent shall, pursuant to irrevocable instructions, deliver the Merger Consideration contemplated to be issued in accordance with this Article 3 out of the Exchange Fund.

(c) Further Rights in Company Common Stock . All Merger Consideration issued and paid upon conversion of shares of Company Common Stock in accordance with the terms hereof shall be deemed to have been issued and paid in full satisfaction of all rights pertaining to such Company Common Stock.

(d) Termination of Exchange Fund . Any portion of the Exchange Fund that remains undistributed to the holders of shares of Company Common Stock for 180 days after the Effective Time may be delivered to the Surviving Corporation, upon demand, and any holders of shares of Company Common Stock who have not theretofore complied with this Article 3 shall thereafter look only to the Surviving Corporation (subject to applicable abandoned property, escheat and similar Laws) for the Merger Consideration, without any interest thereon.

(e) No Liability . None of Parent, the Company, Merger Sub or the Surviving Corporation shall be liable to any Person for any amount from the Exchange Fund delivered to a Governmental Entity pursuant to any applicable abandoned property, escheat or similar Laws.

(f) Lost Certificates . If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed, and, if required by the Surviving Corporation in its discretion, the posting by such Person of a bond, in such reasonable amount as the Surviving Corporation may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will deliver in exchange for such lost, stolen or destroyed Certificate the Merger Consideration to be paid in respect of the shares of Company Common Stock represented by such Certificate, without any interest thereon.

(g) Withholding Generally . Parent, Merger Sub or the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Company Common Stock, Company Options or Company Warrants such amounts as Parent, Merger Sub or the Exchange Agent are required to deduct and withhold under the Code, or any

 

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provision of state, local, provincial or foreign Tax Law. To the extent that amounts are so withheld by Parent, Merger Sub or the Exchange Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of shares of Company Common Stock, Company Options or Company Warrants in respect of whom such deduction and withholding was made by Parent, Merger Sub or the Exchange Agent.

(h) Section 1445 Withholding . To the extent that any holder of shares of the Company Common Stock, Company Options, or Company Warrants has failed to provided a certificate in form and substance reasonable satisfactory to Parent, duly executed and acknowledged, certifying that such holder is not subject to withholding under Section 1445 of the Code, Parent, Merger Sub or the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to such holder, such amounts as Parent, Merger Sub or Exchange Agent are required to deduct and withhold under Section 1445 of the Code. To the extent that amounts are so withheld by Parent, Merger Sub or the Exchange Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to such holder.

3.7 Convertible Securities .

(a) Company Options . At the Effective Time, each then-outstanding unexpired and unexercised Company Option, whether vested or unvested, will become fully vested and deemed exercised on such date. Upon such deemed exercise, the holder of each such Company Option shall immediately receive a cash payment from Parent or the Surviving Corporation equal to the product of (i) the total number of vested and unexercised shares of Company Common Stock that were subject to such Company Option immediately prior to the Effective Time, multiplied by (ii) the excess (if any) of (A) the Per Share Closing Date Merger Consideration over (B) the exercise price per share subject to such Company Option, such cash payment to be reduced by any required withholding of Taxes. Prior to the Effective Time, the Company shall have taken all actions necessary (including obtaining all necessary amendments or consents from holders of outstanding Company Options) to give effect to the transactions contemplated by this Section 3.7. After the Effective Time, no Company Option shall be exercisable to any extent, whether for shares of Company Common Stock or shares of the common stock of the Surviving Corporation, the Parent or any of their respective Affiliates.

(b) Company Warrants . Cypress has entered into an agreement with the Company terminating all outstanding Company Warrants without liability to the Company and the Company Subsidiaries (“ Warrant Termination Agreement ”) as of the Effective Time.

(c) The Company (including any appropriate committee of its board of directors) shall take all action necessary (including obtaining any required consents) in order to effect the foregoing provisions of this Section 3.7 as of the Effective Time.

3.8 Merger Bonus . The Compensation Committee of the Board of Directors of the Company has authorized the Chairman of the Board and the Chief Executive Officer of the Company to designate a cash transaction bonus pool equivalent to the difference between the Merger Consideration and $14.00 per share based on up to 350,000 shares of Company Common Stock as bonuses (each a “ Merger Bonus ”) to certain employees of the Company in connection with the Merger (the “ Company Merger Bonus Plan ”). Each employee that is awarded a Merger Bonus shall receive a cash payment from Parent or the Surviving Corporation at the Effective Time in an amount equal to the product of (i) the total number of shares of Company Common Stock designated for such employee multiplied by (ii) the excess of (A) the Per Share Closing Date Merger Consideration minus (B) $14.00. Two Business Days prior to Closing, the Company shall deliver to Parent a schedule setting forth the name of each employee to whom a Merger Bonus was awarded and the amount of the Merger Bonus awarded to such employee.

 

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Notwithstanding the foregoing, to the extent that the aggregate Merger Bonus under the Merger Bonus Plan is less than $402,500, at the Effective Time, Parent shall contribute the positive difference between the amount owing under the Merger Bonus Plan as in effect on the date hereof and $402,500.

3.9 Employee Stock Ownership Plan .

(a) As soon as practicable after the execution of the Agreement, the Company shall adopt resolutions to provide that the CC ESOP shall be terminated immediately following the receipt of the Merger Consideration by the CC ESOP trust on behalf of the CC ESOP’s participants and beneficiaries.

(b) Each participant in the CC ESOP who is not fully vested shall become fully vested in his or her CC ESOP account(s) upon the Closing Date.

(c) The termination of the CC ESOP will be adopted conditioned upon the consummation of the Merger and distributions upon termination of the CC ESOP will be made upon receipt of and to the extent approved by a favorable determination letter from the IRS with regard to the continued qualification of the CC ESOP in connection with its termination, after any required amendments. The Company and Parent shall cooperate in submitting appropriate requests for any such determination letter to the IRS and will use their reasonable efforts to seek the issuance of such letter no later than as soon as possible following the date hereof. The Company shall adopt such additional amendments to the CC ESOP as may be reasonably required by the IRS as a condition to granting such determination letter or as may be necessary or appropriate to permit the investment of the Merger Consideration received by the CC ESOP in investments other than Company Common Stock, pending distribution.

(d) As of and following the Effective Time, Parent shall cause the CC ESOP, in the event the CC ESOP is maintained for a time to allow for distributions to participants, to be maintained for the exclusive benefit of employees and other persons who were participants or beneficiaries therein prior to the Effective Time in accordance with its terms, subject to the amendments described herein and as otherwise may be required to comply with applicable law or to obtain a favorable determination letter from the IRS as to the qualified status of the termination of the CC ESOP.

(e) The Company shall not contribute or issue additional shares of Company Common Stock to the CC ESOP prior to the Effective Time, and to the Company’s Knowledge, the CC ESOP Trustee is not contemplating purchasing any additional shares of Company Common Stock prior to the Effective Time.

3.10 Dissenting Stockholders . Notwithstanding anything in this Agreement to the contrary, shares of Company Common Stock that are outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger or consented thereto in writing and who has demanded appraisal for such shares of Company Common Stock in accordance with Section 262 of the DGCL (“ Dissenting Shares ”) shall not be converted into a right to receive the Merger Consideration but instead shall only be entitled to the rights provided under Section 262 of the DGCL. At the Effective Time, by virtue of the Merger (x) all Dissenting Shares shall be cancelled and cease to exist and (y) the holder or holders of Dissenting Shares shall be entitled only to such rights as may be granted to them under Section 262 of the DGCL; provided, however, that if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to appraisal and payment under the DGCL, the right of such holder to such appraisal of its shares of Company Common Stock shall cease, and such shares of Company Common Stock shall be deemed converted as of the Effective Time into the right to receive the Merger Consideration as provided in this Article 3. The Company shall give Parent prompt notice of any

 

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written demands received by the Company for appraisal of shares and the opportunity to direct all negotiations and proceedings with respect to the exercise of appraisal rights under Section 262 of the DGCL. The Company shall not, except with Parent’s prior written consent, voluntarily make any payment with respect to or offer to settle or settle any demands for appraisal for Dissenting Shares.

ARTICLE 4

Company Representations and Warranties

Except as set forth in (i) the disclosure letter delivered by the Company to Parent concurrently with the execution of this Agreement (the “ Company Disclosure Letter ”) and (ii) the Company’s Form 10-K for the year ended December 27, 2005 (other than in the exhibits or any documents incorporated by reference thereto), the Company hereby represents and warrants to Parent and Merger Sub as follows:

4.1 Organization and Qualification; Subsidiaries .

(a) The Company is a corporation organized, validly existing and in good standing under the laws of the State of Delaware. Each Subsidiary of the Company other than the Pinehurst Subsidiaries (each a “ Company Subsidiary ” and, collectively, the “ Company Subsidiaries ”) has been organized, and is validly existing and in good standing, under the laws of the jurisdiction of its incorporation or organization, as the case may be. The Company and each Company Subsidiary has the requisite power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted and as currently proposed by it to be conducted. The Company and each Company Subsidiary is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification, licensing or good standing necessary, except, in the case of the Company Subsidiaries, where the failure to be so qualified, licensed or in good standing would not reasonably be expected to have a Material Adverse Effect.

(b) Section 4.1(b) of the Company Disclosure Letter sets forth a true, correct and complete list as of the date hereof of all of the Company Subsidiaries and the jurisdictions of their incorporation or organization and each of the jurisdictions where such entity is qualified as a foreign entity, as the case may be. None of the Company or any Company Subsidiary holds an Equity Interest in any Person other than a Company Subsidiary. The Company is the direct or indirect owner of all of the issued and outstanding Equity Interests of each Company Subsidiary, and all such Equity Interests are duly authorized, validly issued, fully paid and nonassessable. All of the issued and outstanding Equity Interests of each Company Subsidiary owned directly or indirectly by the Company are free and clear of all Encumbrances, other than those under the Loan Agreements.

(c) The Company has made available to Parent true, correct and complete copies, of all certificate or articles of incorporation, bylaws, and other organizational documents of each of the Company and the first tier subsidiaries of the Company, as currently in effect.

4.2 Capitalization .

(a) The authorized capital stock of the Company consist of 250,000,000 shares of Company Common Stock and 150,000,000 shares of preferred stock, par value $0.01 per share (the “ Company Preferred Stock ”). As of the date hereof, (i) 92,791,912 shares of Company Common Stock (other than treasury shares) were issued and outstanding, all of which were validly issued and fully paid and nonassessable and (ii) 6,802,496 shares of Company Common Stock were held in the treasury of the Company. As of the date hereof, no shares of Company Preferred Stock are issued or outstanding. None of the Company Subsidiaries own any shares of Company Common Stock.

 

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(b) As of the date hereof, the Company has reserved 8,673,434 shares of Company Common Stock for issuance to employees, non-employee directors and consultants pursuant to the Company Stock Option Plans, of which 8,101,303 shares are subject to outstanding and unexercised Company Options and 572,131 shares remain available for issuance thereunder. Upon the issuance of any share of Company Common Stock upon the exercise of Company Options prior to the Effective Time on the terms and conditions specified in the instruments pursuant to which such share is issuable, such share will be duly authorized, validly issued, fully paid and nonassessable.

(c) The Company has made available to Parent true, correct and complete copies of all Company Stock Option Plans and all forms of option agreements and other stock-based award agreements representing options or awards currently outstanding pursuant to those Company Stock Option Plans.

(d) As of the date hereof, there are outstanding and unexercised Company Warrants to purchase 1,012,500 shares of Company Common Stock. Upon the issuance of any share of Company Common Stock upon the exercise of Company Warrants prior to or at the Effective Time on the terms and conditions specified in the instruments pursuant to which such share is issuable, such share will be duly authorized, validly issued, fully paid and nonassessable. The Company shall take all requisite action such that the Company Warrants shall be terminated at Closing.

(e) Except as provided in the Company Stock Option Plans, Company’s agreements granting stock options to employees of the Company or any Company Subsidiary pursuant to the Company Stock Option Plans or the Stockholders Agreement, there are no outstanding contractual obligations of the Company or any Company Subsidiary (i) restricting the transfer of, (ii) affecting the voting rights of, (iii) requiring the repurchase, redemption or disposition of, or containing any right of first refusal with respect to, (iv) requiring the registration for sale of, or (v) granting any preemptive or antidilutive right with respect to, any shares of Company Common Stock or any other Equity Interests in the Company or any Company Subsidiary.

(f) Except for Company Warrants, Company Options or under the Stockholders Agreement, there are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, calls, commitments or rights of any kind that obligate the Company or any Company Subsidiary to issue or sell any shares of capital stock or other Equity Interests or other securities of the Company or any Company Subsidiary or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to subscribe for or acquire, any securities of the Company or any Company Subsidiary, and no securities or obligations evidencing such rights are authorized, issued or outstanding.

(g) Except for the Stockholders Agreement, there are no stockholders agreements, registration rights agreements, voting trusts, proxies or similar agreements, arrangements or commitments to which the Company or any of its Subsidiaries is a party or of which the Company has Knowledge with respect to any shares of capital stock or other equity interests of the Company or any of its Subsidiaries or any other Contract relating to disposition, voting or dividends with respect to any equity securities of the Company or of any Subsidiary. There are no bonds, debentures, notes or other instruments of Indebtedness of the Company or any of its Subsidiaries that have the right to vote, or that are convertible or exchangeable into or exercisable for securities having the right to vote, on any matters on which stockholders of the Company may vote.

 

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4.3 Authority; Voting .

(a) The Company has the requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated by this Agreement (subject to the Company Stockholders Approval). The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action (other than the Company Stockholders Approval). This Agreement has been duly authorized and validly executed and delivered by the Company and (assuming the valid authorization execution and delivery of this Agreement by Parent and Merger Sub) constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject only to the effect, if any, of (i) applicable bankruptcy, insolvency, moratorium or other similar Laws affecting the rights of creditors generally and (ii) rules of Law governing specific performance, injunctive relief and other equitable remedies. The affirmative vote of the holders of a majority of all shares of Company Common Stock issued and outstanding on the record date set for the meeting of the Company’s stockholders to adopt this Agreement (the “ Company Stockholders Meeting ”) is the only vote of the holders of capital stock of the Company necessary to adopt this Agreement and effect of the Merger under applicable Law and the Company Certificate of Incorporation (the “ Company Stockholders Approval ”).

(b) The Company has taken all appropriate and required actions so that the restrictions on “business combinations” contained in Section 203 of the DGCL shall not apply with respect to, or as a result of, this Agreement, the Voting Agreement and the transactions contemplated hereby (including the Merger) and thereby without any further action on the part of the Company’s stockholders or the Company Board. There are no anti-takeover laws of any other state, federal or foreign jurisdiction that would apply to the execution, delivery or performance of this Agreement, the Voting Agreement or the consummation of the Merger or the other transactions contemplated hereby and thereby.

(c) The Company’s Board of Directors has adopted resolutions (i) approving and declaring advisable the Merger, this Agreement, the Voting Agreement and the transactions contemplated hereby and thereby; (ii) declaring that it is in the best interests of the stockholders of the Company that the Company enter into this Agreement and consummate the Merger upon the terms and subject to the conditions set forth in this Agreement; (iii) directing that this Agreement be adopted by the stockholders of the Company; and (iv) recommending to the stockholders of the Company that they adopt this Agreement (the “ Company Board Recommendation ”).

(d) Cypress has provided its written consent to the Merger and the transactions contemplated hereby in accordance with the terms of the Stockholders Agreement.

4.4 No Conflict; Required Filings and Consents .

(a) The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, (i) conflict with or violate any provision of the Company Certificate of Incorporation or Company Bylaws or any equivalent organizational documents of any Company Subsidiary, (ii) subject to obtaining the Company Stockholders Approval and assuming that all consents, approvals, authorizations and permits described in Section 4.4(b) have been obtained and all filings and notifications described in Section 4.4(b) have been made and any waiting periods thereunder have terminated or expired, conflict with or violate any Law applicable to the Company or any Company Subsidiary, or by which any property or asset of the Company or any Company Subsidiary is bound or affected, or (iii) result in any breach of, constitute a default under, cause any loss of any material benefit under, or give to others any right of termination or cancellation pursuant to, any Material Contract

 

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or any Specified Contract, except in the case of clauses (ii) through (iii), for such conflicts, violations, breaches, defaults, losses or rights as would not reasonably be expected to have a Material Adverse Effect.

(b) No filing or registration with, or authorization, consent or approval of, any Governmental Entity (other than filings, registrations, authorizations, consents and approvals, the failure of which to make or obtain would not, individually or in the aggregate, have or reasonably be expected to have a Material Adverse Effect) is required by or with respect to the Company or any Company Subsidiary in connection with the execution and delivery of this Agreement by the Company or is necessary for the consummation by the Company of the Merger except under the Exchange Act, Antitrust Laws, and the filing of the Certificate of Merger as required by the DGCL.

4.5 Permits; Compliance with Law .

(a) Each of the Company and each Company Subsidiary is in possession of all authorizations, licenses, permits, certificates, registrations, approvals and clearances of any Governmental Entity, and has made all material filings, applications and registrations with any Governmental Entity, in each case that are reasonably necessary for the Company and each Company Subsidiary to own, lease and/or operate its properties or other assets, or to carry on its respective businesses substantially as it is being conducted as of the date hereof (the “ Company Permits ”), and all such Company Permits are valid and in full force and effect; except in all cases where the failure to have, or the suspension or cancellation of, or the failure to be valid or in full force and effect of, any of the Company Permits would not, individually or in the aggregate, have or reasonably be expected to have a Material Adverse Effect.

(b) None of the Company or any Company Subsidiary is in conflict with, or in default or violation of, (i) any Law applicable to the Company or any Company Subsidiary or by which any property or asset of the Company or any Company Subsidiary is bound or affected, including any Law related to unclaimed property or (ii) any Company Permit, except, with respect to both clauses (i) and (ii), for any such conflicts, defaults or violations that would not, individually or in the aggregate, have or reasonably be expected to have a Material Adverse Effect. No investigation or inquiry by any Governmental Entity with respect to the Company or any Company Subsidiary is pending or, to the Knowledge of Company, threatened, in each case with respect to any alleged or claimed material violation of Law applicable to the Company or any Company Subsidiary or by which any property or asset of the Company or any Company Subsidiary is bound or affected, except, in each case, as would not, individually or in the aggregate, have or reasonably be expected to have a Material Adverse Effect.

4.6 SEC Filings; Financial Statements .

(a) The Company has filed all forms, reports, statements and schedules (including items incorporated by reference) required to be filed by it with the SEC since January 1, 2004 (the “ Company SEC Reports ”). Each Company SEC Report (i) was filed on a timely basis, (ii) at the time filed, complied as to form in all material respects with the applicable requirements of the Securities Act and the Exchange Act, as the case may be, and the rules and regulations promulgated by the SEC thereunder applicable to such Company SEC Report, each as in effect on the date filed, and (iii) did not at the time filed (except to the extent that information contained in any Company SEC Report has been superseded or revised by a subsequent Company SEC Report filed prior to the date hereof) contain any untrue statement of a material fact or omit to state a material fact required to be stated in each such Company SEC Report or necessary in order to make the statements in each such Company SEC Report, in the light of the circumstances under which they were made, not misleading. No Company Subsidiary is subject to the reporting requirements of Section 13(a) or Section 15(d) of the Exchange Act.

 

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(b) Each of the consolidated financial statements (including, in each case, any related notes thereto) contained in the Company SEC Reports (the “ Company Financial Statements ”), including in each Company SEC Report filed after the date of this Agreement until the Closing, (i) complied as to form in all material respects with the published rules and regulations of the SEC with respect thereto, (ii) was prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited interim financial statements, as may be permitted by the SEC on Form 10-Q, Form 8-K or any successor form under the Exchange Act), and (iii) fairly presented, in all material respects, the consolidated financial position of the Company and the Company Subsidiaries as at the respective dates thereof and the consolidated results of Company’s and the Company Subsidiaries’ operations and cash flows for the periods indicated, except that the unaudited interim financial statements may not contain footnotes and were or are subject to normal and recurring immaterial year-end adjustments in accordance with GAAP. The balance sheet of the Company as of December 27, 2005 (the “ Company Balance Sheet Date ”) contained in the Company SEC Reports is hereinafter referred to as the “ Company Balance Sheet .” Neither the Company nor any Company Subsidiary has any liabilities required under GAAP to be recorded or set forth on a balance sheet prepared as of December 27, 2005 that are, individually or in the aggregate, material to the business, results of operations or financial condition of the Company and the Company Subsidiaries taken as a whole, except for (A) liabilities incurred since the Company Balance Sheet Date in the ordinary course of business consistent with past practice, (B) those specifically set forth or specifically and adequately reserved against in the Company Balance Sheet, and (C) the fees and expenses of investment bankers, attorneys and accountants incurred in connection with this Agreement. Solely for the purposes of this Section 4.6(b), the term “Company Subsidiaries” shall include the Pinehurst Subsidiaries.

(c) Each of the Company SEC Reports as of the date of the filing of such report, complied in all material respects with the requirements of, to the extent then applicable, SOXA, including in each case, the rules and regulations promulgated by the SEC thereunder.

(d) The Company has established and maintains disclosure controls and procedures (as defined in Rule 13a-15 under the Exchange Act). Such disclosure controls and procedures are designed to ensure that material information relating to the Company, including the Company Subsidiaries, is made known to the Company’s principal executive officer and its principal financial officer by others within those entities, particularly during the periods in which the periodic reports required under the Exchange Act are being prepared. To the Knowledge of the Company based on its evaluation of internal controls as of the end of the period covered by its most recent quarterly report on Form 10-Q (the “ Evaluation Time ”), such disclosure controls and procedures were effective at the Evaluation Time in timely alerting the Company’s principal executive officer and principal financial officer to material information required to be included in the Company’s periodic reports required under the Exchange Act. To the Knowledge of the Company, no event, circumstance or event has occurred since the Evaluation Time that would cause the Company to believe that the Company’s disclosure controls and procedures are not currently effective.

(e) The Company has established and maintains a system of internal control over financial reporting (as defined in Rule 13a-15 under the Exchange Act). To the Knowledge of the Company, based on the evaluation of the Company’s internal control over financial reporting at the Evaluation Time by the Company’s Chief Executive Officer and Chief Financial Officer, such internal control over financial reporting was, at the Evaluation Time, sufficient to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of Company financial statements for external purposes in accordance with GAAP. To the Knowledge of the Company, no event, circumstance or event has occurred since the Evaluation Time that would cause the Company to believe that the Company’s internal controls are not currently effective. The Company disclosed, based on the evaluation of the Company’s internal control over financial reporting at the Evaluation Time, to the

 

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Company’s auditors and audit committee (i) any significant deficiencies and material weaknesses known to the Company’s Chief Executive Officer and Chief Financial Officer in the design or operation of the Company’s internal control over financial reporting which are reasonably likely to adversely affect in a material respect the Company’s ability to record, process, summarize and report financial information and (ii) any fraud known to the Company’s Chief Executive Officer and Chief Financial Officer that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. The Company has made available to Parent a summary of any disclosure regarding clauses (i) or (ii) of the previous sentence made by management to the Company’s auditors and audit committee since January 1, 2004.

4.7 Absence of Certain Changes or Events . Except (i) for liabilities incurred in connection with this Agreement, the transactions contemplated by the Pinehurst Acquisition Agreement or the transactions contemplated hereby or thereby, (ii) as disclosed in the Company SEC Reports filed prior to the date of this Agreement and (iii) as permitted by Section 6.1, since December 27, 2005, the Company and each Company Subsidiary have conducted its business in the ordinary course consistent with past practice, and there have not been any changes, circumstances or events which have had or would reasonably by expected to have a Material Adverse Effect. From June 13, 2006 until the date hereof, neither the Company nor any Company Subsidiary has taken any action which, if taken after the date hereof, would violate Section 6.1.

4.8 Employee Benefit Plans; Labor and Employment Matters .

(a) Section 4.8(a) of the Company Disclosure Letter lists each of the Company Benefit Plans.

(b) Neither the Company nor any Company Subsidiary maintains or is obligated to provide benefits under any life, medical or health plan (other than as an incidental benefit under a Company Benefit Plan intended to be “qualified” within the meaning of Section 401(a) of the Code (a “ Qualified Plan ”)) which provides benefits to retirees or other terminated employees other than benefit continuation rights under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”).

(c) Neither the Company, any of its Subsidiaries, nor any ERISA Affiliate with respect to which the Company or any of the Company Subsidiaries would have any liability has at any time within the prior six (6) years contributed to or had the obligation to contribute to or has any obligation to contribute to or has any liability (contingent or otherwise) to any “employee benefit plan” (as defined in Section 3(3) of ERISA) that is subject to Title IV of ERISA or Section 412 of the Code, including any “multiemployer plan,” as that term is defined in Section 4001 of ERISA.

(d) Each of the Company Benefit Plans has been adopted and operated in compliance in all material respects with ERISA and the Code and all other applicable Laws and has been adopted and operated in accordance with the terms and provisions of the plan document and all related documents and policies.

(e) With respect to any multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA) to which the Company, any of the Company Subsidiaries, or any of their respective ERISA Affiliates with respect to which the Company or any of its Subsidiaries would have any liability, has any liability or contributes (or has at any time within the past six (6) years contributed or had an obligation to contribute), to the Company’s Knowledge: (A) none of the Company, any of its Subsidiaries, or any of their respective ERISA Affiliates with respect to which the Company or any of the Company Subsidiaries would have any liability has incurred any withdrawal liability under Title IV of

 

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ERISA which remains unsatisfied or would be subject to such liability if, as of the Effective Time, the Company, any of the Company Subsidiaries or any such ERISA Affiliates were to engage in a complete withdrawal (as defined in Section 4203 of ERISA) or partial withdrawal (as defined in Section 4205 of ERISA) from any such multiemployer plan; and (B) no such multiemployer plan is in reorganization or insolvent (as those terms are defined in Sections 4241 and 4245 of ERISA, respectively).

(f) With respect to any Company Benefit Plan that is not a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA but is subject to Title IV of ERISA: (A) the assets of each such Company Benefit Plan are at least equal in value to the present value of the accrued benefits (vested and unvested) of the participants in such Company Benefit Plan on a termination and projected benefit obligation basis, based on the actuarial methods and assumptions indicated in the most recent applicable actuarial valuation reports; (B) no “reportable event” (as such term is defined in Section 4043 of ERISA) that could reasonably be expected to result in liability, or “accumulated funding deficiency” (as such term is defined in Section 302 of ERISA and Section 412 of the Code (whether or not waived)) has occurred with respect to any Company Benefit Plan within the past six (6) years; and (C) to the Company’s Knowledge, no written or oral communication has been received from the Pension Benefit Guaranty Corporation (the “ PBGC ”) in respect of any such Company Benefit Plan concerning the funded status of any such plan or any transfer of assets and liabilities from any such plan in connection with the transactions contemplated herein within the past six (6) years.

(g) The Company and the Company Subsidiaries have performed all of their material obligations under all Company Benefit Plans, and all contributions and other payments required to be made by Company or any Company Subsidiary to any Company Benefit Plan have been made or reserves adequate for such contributions or other payments have been set aside therefor and have been reflected in the Company Balance Sheet.

(h) There are no pending or, to the Company’s Knowledge, threatened material claims by or on behalf of or with respect to any Company Benefit Plan, or by any Person covered thereby, other than ordinary claims for benefits submitted by participants or beneficiaries.

(i) Except Company Common Stock held in the CC ESOP and Company Common Stock credited under the ClubCorp, Inc. Deferred Compensation Plan, no employer securities, employer real property or other employer property is included in the assets of any Company Benefit Plan.

(j) The Company made available to Parent:

(1) true, correct and complete copies of the current Company Benefit Plan document and any amendments thereto for each Company Benefit Plan and copies of any related trusts, and (A) the most recent summary plan descriptions of such Company Benefit Plans for which the Company or any Company Subsidiary is required to prepare, file, and distribute summary plan descriptions, and (B) the most recent copy of all summaries and descriptions furnished by the Company, if any, to participants and beneficiaries regarding Company Benefit Plans for which a plan description or summary plan description is not required;

(2) the Form 5500 filed in each of the most recent three (3) plan years with respect to each Company Benefit Plan, including all schedules thereto and any opinions of independent accountants relating thereto;

(3) all insurance policies or agreements regarding other funding arrangements that are currently in force which were purchased by or that provide benefits under any Company Benefit Plan or otherwise reimburse for benefits paid under the Company Benefit Plans;

 

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(4) all written agreements that are currently in force with trustees and third party administrators, investments managers, consultants and service providers relating to any Company Benefit Plan and any and all written reports, including discrimination testing, submitted to the Company or any Company Subsidiary by such third party administrators, investment managers, consultants and service providers within the three (3) years preceding the date hereof; and

(5) with respect to Company Benefit Plans that are Qualified Plans, the most recent determination letter for each such Company Benefit Plan.

(k) Except for any formal written qualification requirement with respect to which the remedial amendment period set forth in Section 401(b) of the Code, and any regulations, rulings or other IRS releases thereunder, has not expired (i) each Company Benefit Plan that is intended to be a Qualified Plan has received a favorable determination letter from the IRS and is qualified under Section 401(a) of the Code, and each trust for each such Company Benefit Plan is exempt from federal income tax under Section 501(a) of the Code and (ii) to the Company’s Knowledge, no event has occurred or circumstance exists that could reasonably be expected to give rise to disqualification or loss of tax-exempt status of any such Company Benefit Plan or trust.

(l) Except with respect to matters that would not have a Material Adverse Effect: (i) each of the Company and each of the Company Subsidiaries is in compliance in all material respects with all currently applicable Laws respecting employment, discrimination in employment, terms and conditions of employment, worker classification (including the proper classification of workers as independent contractors and consultants), wages, hours and occupational safety and health and employment practices, including the Immigration Reform and Control Act, (ii) the Company and each of the Company Subsidiaries has paid in full to all employees, independent contractors and consultants all wages, salaries, commissions, bonuses, benefits, and other compensation due to or on behalf of such employees, independent contractors or consultants in accordance with applicable Law, (iii) neither the Company nor any of the Company Subsidiaries is liable for any payment to any trust or other fund or to any Governmental Entity, with respect to unemployment compensation benefits, social security or other benefits or obligations for employees (other than routine payments to be made in the normal course of business and consistent with past practice), and (iv) there are no controversies pending or, to the Knowledge of the Company, threatened, between the Company or any of the Company Subsidiaries and any of their respective employees, which controversies have or could reasonably be expected to result in an action, suit, proceeding, claim, arbitration or investigation before any Governmental Entity.

(m) Neither the Company nor any of the Company Subsidiaries is a party to or bound by any collective bargaining agreement or other labor union Contract and no collective bargaining agreement is being negotiated by the Company or any of the Company Subsidiaries. There is no pending demand for recognition or, to the Knowledge of Company, any other request or demand from a labor organization for representative status with respect to any Person employed by the Company or any Company Subsidiary. The Company has no Knowledge of any activities or proceedings of any labor union seeking to organize its employees nor of any such organizing activities or proceedings within the past three years. There is no labor dispute, strike or group work stoppage against the Company or any Company Subsidiary pending or, to the Knowledge of Company, threatened involving employees of the Company or any Company Subsidiary, nor have there been any such labor dispute, strike or group work stoppage within the last three years. There is no charge or complaint against the Company or any Company Subsidiary by the National Labor Relations Board or any comparable Governmental Entity pending or, to the Knowledge of the Company, threatened.

 

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(n) The Company and each Company Subsidiary is in compliance in all material respects with the Worker Adjustment Retraining Notification Act of 1988, as amended, and all similar state or local Laws (collectively, the “ WARN Act ”). In the past 12 months (i) the Company has not effectuated a “plant closing” (as defined in the WARN Act) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of its business, (ii) there has not occurred a “mass layoff” (as defined in the WARN Act) affecting any site of employment or facility of the Company or any Company Subsidiary, and (iii) the Company has not engaged in layoffs or employment terminations sufficient in number to trigger application of any similar state, local or foreign law or regulation. The Company has not caused any of its employees to suffer an “ employment loss ” (as defined in the WARN Act) during the 90-day period prior to the date of this Agreement.

(o) Neither the Company nor any of the Company Subsidiaries (nor any director or employee of the Company or any Company Subsidiary) is a party to any agreement, Contract, or arrangement (including any Company Benefit Plan) that, individually or collectively, either alone or together with any other event (including the execution of and consummation of the transactions contemplated by this Agreement), could g