INTEREST PURCHASE AGREEMENT

Exhibit 2.2

EXECUTION COPY

 

INTEREST PURCHASE AGREEMENT

dated as of September 12, 2006

by and among

PUTTERBOY, LTD.,

CLUBCORP, INC.,

and

THE PINEHURST COMPANY

 

TABLE OF CONTENTS

 

 

ii

Exhibits

 

 

iii

INTEREST PURCHASE AGREEMENT

This INTEREST PURCHASE AGREEMENT (this “ Agreement ”), dated as of September 12, 2006, by and among Putterboy, Ltd., a Texas limited partnership (“ Purchaser ”), ClubCorp, Inc., a Delaware corporation (“ ClubCorp ”) and The Pinehurst Company, a Delaware corporation (“ Pinehurst Company ”). Purchaser, ClubCorp and Pinehurst Company are referred to collectively herein as the “ Parties .”

RECITALS

WHEREAS, Pinehurst Company, directly or indirectly, owns all of the outstanding capital stock of: (a) Pinehurst, Inc., a North Carolina corporation (“ Pinehurst, Inc. ”); (b) Pinehurst Championship Management, Inc., a North Carolina corporation; (c) Pinehurst Country Club, Inc., a North Carolina corporation; (d) ClubCorp Realty East, Inc., a North Carolina corporation; (e) PCC Realty Corp., a North Carolina corporation; (f) Pinehurst Acquisition Corp., a North Carolina corporation; (g) Pinehurst Realty Corp., a Nevada corporation; and (h) Pinehurst No. VII, Inc., a North Carolina corporation (in each case including its successor limited liability company to be organized pursuant to Section 6.10 hereof, and each individually, a “ Pinehurst Entity ” and collectively, the “ Pinehurst Entities ”);

WHEREAS, Purchaser desires to purchase from Pinehurst Company, and Pinehurst Company desires to sell to Purchaser, all of the outstanding equity of the Pinehurst Entities; and

WHEREAS, the board of directors of ClubCorp (the “ ClubCorp Board ”), upon recommendation of a special committee appointed by the ClubCorp Board (the “ Special Committee ”), has approved the transactions contemplated by this Agreement on the terms and subject to the conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the foregoing recitals, the representations, warranties and covenants set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS

1.1 Definitions . When used in this Agreement, the following terms shall have the respective meanings assigned to them in this Section 1.1 .

“ Accounts Receivable ” means the accounts receivable of the Pinehurst Entities due and owing shown on each such Person’s books and records and calculated in a manner consistent with the historical accounting principles applied by such Person, including (i) delinquent annual dues and charges, (ii) uncollected membership dues, and (iii) unpaid credit card receivables.

“ Accrued Employee Liabilities ” means any and all liabilities related to Employees which, in accordance with GAAP and as of the Closing Date, would be required to be included in the financial statements of the Pinehurst Entities, including all wages, salaries, commissions, bonuses, severance pay, vacation, sick leave, other paid leave, benefits, and other compensation or remuneration to Employees and Former Employees for or on account of employment.

“ Acquisition Proposal ” means, with respect to the Pinehurst Entities, any agreement, offer or proposal (other than this Agreement or any other offer or proposal by Pinehurst Company) relating to or involving (i) any direct or indirect acquisition or purchase from ClubCorp or Pinehurst Company or any acquisition by any Person or group of Persons of more than a 25% interest in the total outstanding voting securities of the Pinehurst Entities or more than a 25% interest in the total outstanding voting securities of the Pinehurst Entities that, if consummated, would result in any Person or group of Persons beneficially owning 25% or more of the total outstanding voting securities of any of the Pinehurst Entities, (ii) any merger, consolidation, business combination or similar transaction involving the Pinehurst Entities, or (iii) any sale, lease, mortgage, pledge, exchange, transfer, license, acquisition or disposition of 25% or more of the consolidated assets of the Pinehurst Entities in any single transaction or series of related transactions (other than in the Ordinary Course of Business).

“ Affiliate ” has the meaning used in Rule 145 promulgated by the SEC under the Securities Act. It is understood and agreed that Purchaser and those Persons related to or affiliated with Robert H. Dedman, Jr. who hold equity interests in Purchaser and Purchaser’s Affiliates are not Affiliates of ClubCorp, Pinehurst Company or the Pinehurst Entities, and that any reference in this Agreement to an Affiliate or Affiliates of ClubCorp, Pinehurst Company or the Pinehurst Entities does not include such Person, and any reference to an Affiliate of Purchaser does not include ClubCorp, Pinehurst Company or the Pinehurst Entities.

“ Ancillary Agreements ” means the Centralized Services Agreement, the Consulting and Shared Services Agreement, the Associates Club Agreement, the Society Reciprocal Membership Agreement, the Reciprocal License Agreement, the Team Championship Agreements and the Hackers License Agreement.

“ Assets ” means, collectively but without duplication, any and all assets that are (i) owned by the Pinehurst Entities, (ii) owned by ClubCorp, Pinehurst Company or any of their Affiliates and which are located or situated in, on or at, or within fifty (50) miles of, the resort in the Village of Pinehurst, North Carolina commonly known as the “Pinehurst Resort and Country Club,” (iii) listed on Exhibit A attached hereto, OR (iv) listed on Exhibit B attached hereto.

“ Balance Sheet Liabilities ” means, as of the Closing Date, (A) an amount equal to the total liabilities of the Pinehurst Entities that, in accordance with GAAP, are, or should be, reflected on the balance sheets of the Pinehurst Entities as of the Closing Date (including the Accrued Employee Liabilities), plus (B) without duplication with clause (A), the liabilities of the Pinehurst Entities that are accounted for and reflected in the categories set forth on the Hypothetical Estimated Purchase Price Certificate, minus (C) 40% of the total amount of accrued gift card liabilities of the Pinehurst Entities outstanding as of the date of this Agreement (Account No. 20829), minus (D) the aggregate amount of all balance sheet liabilities with respect to (a) AP: Intercompany #1 (Account No. 20301), (b) Deferred Income (Account No. 20801), (c) Initiation Fees - Cash (Account No. 20850), (d) IF Contra Account - Chronolog Use (Account No. 20860), (e) Deferred Revenue - Initiation Depo (Account No. 20835), (f) Deferred Revenue

 

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- Initiation Fees (Account No. 20836), (g) NP Capital Lease #2: Conversion (Account No. 22507), (h) N/P Capital Lease #3: Conversion (Account No. 22512), (i) Deferred Revenue - Initiation Fees (Account No. 23506), (j) Discount on Initiation Deposits (Account No. 24015), and (k) Initiation Deposits - Cash (Account No. 24030); provided, that in order to avoid a double-counting, that Parties may mutually agree to an offset to “Balance Sheet Liabilities” related to monthly membership dues (which shall depend on the timing of the Closing Date in relation to the membership dues collection cycle); provided, further, that the no liabilities associated with the Indebtedness Overage shall be included in the calculation of “Balance Sheet Liabilities.”

“ Benefit Plan ” means each “employee benefit plan,” as such term is defined in Section 3(3) of ERISA, and each personnel policy, stock option plan, bonus plan or arrangement, incentive award plan or arrangement, vacation policy, severance or retention pay plan, policy, program or agreement, deferred compensation agreement or arrangement, executive compensation or supplemental income arrangement, retiree benefit plan or arrangement, fringe benefit program or practice (whether or not taxable), employee loan, consulting agreement, employment agreement and each other employee benefit plan, agreement, arrangement, program, practice or understanding.

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

“ Bookings ” means all bookings and reservations for the use of the Pinehurst Entities’ services or facilities, including bookings and reservations for the golf courses, guest rooms and conference rooms owned or operated by the Pinehurst Entities.

“ Business ” means the ownership and operation of the resort located in the Village of Pinehurst, North Carolina, commonly known as “Pinehurst Resort and Country Club.”

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

“ Capital Expenditure Adjustment ” means, as of the Closing Date, the aggregate of:

(a) (i) The capital expenditures expended by the Pinehurst Entities between January 1, 2006 and the earlier of (x) the Closing Date or (y) September 30, 2006, minus (ii) the budgeted capital expenditures for the period from January 1, 2006 to the earlier of (x) or (y) above, which amounts are set forth on the Planned Capital Expenditures Schedule attached as Exhibit C hereto; plus

(b) If the Closing Date occurs after September 30, 2006, (i) the aggregate capital expenditures expended by the Pinehurst Entities between September 30, 2006 and the Closing Date, minus (ii) an amount equal to (A) (x) the number of days in the period beginning September 30, 2006 and ending the Closing Date divided by (y) (I) if the Closing Date occurs after December 31, 2006, 365, or (II) if the Closing Date occurs prior to December 31, 2006, 365 minus the number of days that will elapse between the Closing Date and December 31, 2006, multiplied by (B) 6.5% of the aggregate gross revenues of the Pinehurst Entities from the period beginning January 1, 2006 and ending on the earlier of the Closing Date or December 31, 2006.

 

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“ Cash Amount ” means, as of the Closing Date, the cash and cash equivalents held by the Pinehurst Entities; provided, that no cash associated with the Indebtedness Overage shall be included in the calculation of “Cash Amount.”

“ CERCLA ” means the United States Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. §§ 9601-9675.

“ ClubCorp Merger Agreement ” means an Agreement and Plan of Merger (or other similar agreement) to be entered into by ClubCorp and certain third parties after the date hereof, pursuant to which ClubCorp shall consummate the ClubCorp Merger.

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

“ Commitment Fee ” means the 1% of the loan amount commitment fee required to be prepaid by Purchaser in connection with the proposed refinancing of the Indebtedness of the Pinehurst Entities which is outstanding under the PacLife Loan Agreement and the negotiation and execution of the New Loan Agreement.

“ Contract ” means any agreement, contract, subcontract, lease, sublease, power of attorney, note, loan, evidence of Indebtedness, purchase and sales order, letter of credit, undertaking, covenant not to compete, license, instrument, obligation, commitment, binding understanding, promise, indenture, option, warranty, policy or quotation, whether oral or written, express or implied.

“ Disclosure Schedule ” means the disclosure schedule prepared by the Parties and attached hereto containing the exceptions to the representations and warranties contained in Articles III , IV and V , as well as other information as indicated in other sections of this Agreement.

“ Employee ” means any Person presently employed by the Pinehurst Entities, or any other individual who is classified by the Pinehurst Entities as an employee of a Pinehurst Entity, and who performs services for a Pinehurst Entity, regardless of whether such Person or individual is, as of the date hereof, actively at work or on a leave of absence (including vacation, holiday, sick leave, family and medical leave, disability leave, military leave, jury duty, layoff with rights of recall, and any other leave of absence or similar interruption of active employment that is not considered, according to the policies or practices of the Pinehurst Entities, to have resulted in a termination of employment of such Person or individual).

“ Encumbrance ” means, with respect to any asset, any Lien, option, claims, restriction, easement or other limitation on the title of such property or asset, 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).

 

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“ Environmental, Health and Safety Requirements ” means all federal, state, local and foreign statutes, regulations, ordinances and similar provisions that have the force or effect of Law, and all judicial and administrative Orders and determinations concerning public health and safety, worker health and safety (in each case as related to exposure to Hazardous Materials), pollution or protection of the environment (including air, surface water, groundwater, and surface and subsurface strata), including all those relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, testing, manufacturing, processing, emission, discharge, Release, threatened Release, control, remediation, removal or cleanup of any Hazardous Materials.

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

“ ERISA Affiliate ” means, with respect to a Person, any other Person which, together with such Person, would be treated as a single employer under Section 414(b), (c), (m) or (o) of the Code or Section 4001(a)(14) or 4001(b) of ERISA.

“ Escrow Account ” means the account designated by the Escrow Agent into which the payment required by Section 2.3(a) shall be made and any succeeding account in which the Escrow Amount shall be held by the Escrow Agent.

“ Escrow Agent ” means Wells Fargo Bank N.A., as escrow agent under the Escrow Agreement, or any successor Person appointed in accordance with the terms of the Escrow Agreement.

“ Escrow Agreement ” means an escrow agreement to be executed as of the Closing by and among Purchaser, the Stockholders’ Representative and the Escrow Agent providing for the holding and disbursement of funds from the Escrow Account in accordance with the terms hereof.

“ Escrow Amount ” means $1,000,000.

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

“ Exchange Agent ” shall have the meaning for such term in the ClubCorp Merger Agreement.

“ Expenses ” means all reasonable out-of-pocket expenses (including all fees and expenses of legal counsel, accountants, investment bankers, experts and consultants to a Party 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.

“ Former Employee ” means any Person who was formerly an Employee.

 

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“ 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.

“ Hazardous Material ” means any material, substance, pollutant or contaminant regulated or defined as a “hazardous waste,” “hazardous material,” “hazardous substance,” “extremely hazardous waste,” “restricted hazardous waste,” “contaminant,” “pollutant,” “toxic waste,” or “toxic substance” under any Environmental, Health and Safety Requirements, and further including petroleum, petroleum products, asbestos, presumed asbestos-containing material, asbestos-containing material, lead paint, urea formaldehyde, polychlorinated biphenyls (PCBs), radon, radioactive substances, and mold (and biological and microbiological substances).

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

“ Improvements ” means the buildings, structures and other improvements located on or affixed to the Real Property and all fixtures on the Real Property which constitute real property under Law, including the golf courses, clubhouses, storage buildings, maintenance buildings, tennis pro shops, golf pro shops, cart paths, tees, greens, irrigation and drainage systems, including the sprinklers, pipes, fittings and pumps, paving, walkways, pump stations, cart barn, swimming pools, parking facilities, and all systems, facilities, machinery, equipment, and conduits to provide fire protection, security, heat, exhaust, ventilation, air conditioning, electrical power, light, plumbing, refrigeration, gas, sewer, and water facilities located thereon (including all replacements or additions thereto between the date hereof and the Closing Date).

“ Indebtedness ” means, with respect to any Person, without duplication, (i) all obligations of such Person for borrowed money, or with respect to deposits or advances of any kind to such Person, (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 or services (excluding obligations of such Person to creditors for raw materials, inventory, services and supplies incurred in the ordinary course of such Person’s business), (vi) all capitalized lease obligations of such Person, (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 or currency swap transactions (valued at the termination value thereof), (ix) all letters of credit issued for the account of such Person (excluding letters of credit issued for the benefit of suppliers to support accounts payable to suppliers incurred in the Ordinary Course of Business), (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, and (xi) all guarantees and arrangements having the economic effect of a guarantee of such Person of any indebtedness of any other Person.

 

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“ Indebtedness Overage ” means any cash taken down by Pinehurst, Inc. in connection with the closing of the New Loan Agreement that exceeds the total amount necessary to fully repay the Pinehurst Loan.

“ Intellectual Property ” means all intellectual property owned or licensed (as licensor or licensee) by ClubCorp, Pinehurst Company or the Pinehurst Entities in connection with the ownership or operation of the Business, including trade names, assumed fictional business names, trademarks and service marks (registered and common law), pending trademark and service mark applications, all registered and unregistered copyrights (including those for golf course design and layout, patents (issued and pending applications), all know-how, trade secrets, software, Internet domain name registrations and Internet websites.

“ Interests ” means all equity interests of the Pinehurst Entities.

“ IRS ” means the United States Internal Revenue Service.

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

“ Lien ” means with respect to any asset, any deed of trust, mortgage, lien, pledge, collateral assignment, hypothecation, charge, security interest, title retention agreement, levy, execution, seizure, attachment, garnishment or other similar encumbrance of any kind in respect of such asset, whether or not choate, vested or perfected.

“ Material Adverse Effect ” means any effect, event, occurrence, development, circumstance, change or condition that is materially adverse to the Assets, business, financial condition or results of operations of the Pinehurst Entities, 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 industry in which the Pinehurst Entities operate, (iii) changes in any Laws or GAAP or the accounting rules and regulations of the SEC, (iv) the announcement of this Agreement, the ClubCorp Merger Agreement or the transactions contemplated hereby or thereby, or the identity of ClubCorp, (v) any outbreak of major or material worsening of hostilities in which the United States is involved or any act of terrorism within the United States or directed against its facilities or citizens wherever located, 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.

“ Member ” means a Person holding a Membership.

“ Membership ” means the contract right that provides a Member certain access to the Assets and the Real Property of the Pinehurst Entities in accordance with the particular Member’s category of Membership, as described in the applicable Membership Agreement.

 

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“ Membership Agreement ” means all written agreements executed by a Member entitling such Person to Membership.

“ Order ” means any decree, decision, ruling, subpoena, verdict, order, judgment, writ, award, injunction, stipulation or consent of or by, or settlement agreement with, a Governmental Entity or an arbitrator.

“ Ordinary Course of Business ” means the ordinary course of business of the Pinehurst Entities, consistent with past practice and custom (including with respect to quantity and frequency).

“ PacLife ” means Pacific Life Insurance Company, a Nebraska corporation.

“ PacLife Loan Agreement ” means that certain loan agreement by and among PacLife, Pinehurst, Inc., The Homestead, L.C., a Virginia limited liability company, and Barton Creek Resort & Clubs, Inc., a Texas corporation, dated June 2, 2003.

“ Parent Benefit Plan ” means each Benefit Plan (other than a Pinehurst Benefit Plan) that is sponsored, maintained or contributed to by ClubCorp or any ERISA Affiliate of ClubCorp or any Pinehurst Entity and in which any Employee or Former Employee participates or is covered or with respect to which the Pinehurst Entities may have any liability.

“ Permitted Encumbrances ” means (i) Liens for Taxes, assessments and other governmental levies, fees or charges that are not due and payable as of the Closing Date or which are being contested by appropriate proceedings in a commercially reasonable manner; (ii) published zoning, municipal planning, building codes or other applicable Laws, rules, regulations, permits or ordinances regulating the use, development or occupancy of the Real Property or the activities conducted thereon; (iii) mechanic’s liens and similar Liens for labor, materials or supplies, which are not recorded against any of the Real Property and which are incurred in the Ordinary Course of Business, (iv) such imperfections or irregularities of title, if any, as (A) are not substantial in character, amount, or extent and do not materially detract from the value of the property subject thereto, (B) do not materially interfere with either the present or intended use of such property, and (C) do not or will not, individually or in the aggregate, materially interfere with the conduct or operation of the business of the Pinehurst Entities; (v) the Encumbrances set forth in Section 4.16(b) of the Disclosure Schedule; (vi) any other easement, right-of-way, encroachment, conflict, protrusion or other matter affecting the Real Property shown on the Surveys or other matter shown as an exception to title in the Title Commitments, which (x) is not the subject of a Title Objection Notice delivered within the time period required in Section 6.13 , (y) is cured pursuant to Section 6.13 by causing the Title Company to insure over such matter but which matter is not otherwise removed as an Encumbrance affecting title to the Real Property or (z) becomes a Permitted Encumbrance pursuant to Section 6.13 ; and (vi) Liens granted in favor of PacLife pursuant to the terms of the New Loan Agreement.

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

 

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“ Pinehurst Benefit Plan ” means each Benefit Plan that is sponsored or maintained solely by one or more Pinehurst Entities for the benefit of any of the Employees or Former Employees of such Pinehurst Entities.

“ Pinehurst Loan ” shall have the meaning for such term in the PacLife Loan Agreement.

“ Purchaser Material Adverse Effect ” means any effect, event, occurrence, development, circumstance, change or condition that is materially adverse to the Assets, business, financial condition or results of operations of Purchaser, 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 (which changes, in each case, do not affect ClubCorp in a substantially disproportionate manner as compared to other companies in the industry), (ii) changes or conditions affecting the industry in which Purchaser operates (which changes or conditions, in each case, do not affect Purchaser in a substantially disproportionate manner as compared to other companies in the industry), (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 Purchaser, (v) any action or failure to act by Purchaser or any of its Affiliates, (vi) any outbreak of major or material worsening of hostilities in which the United States is involved or any act of terrorism within the United States or directed against its facilities or citizens wherever located, or (vii) 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.

“ Release ” means, when used as a noun, any actual spilling, leaking, pumping, pouring, emitting, injecting, disposing or leaching of Hazardous Material into the environment (including ambient air, surface water, groundwater, land and surface or subsurface strata); and, when used as a verb, the occurrence of any Release.

“ SEC ” means the United States Securities and Exchange Commission.

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

“ Sellers’ Knowledge ” means the actual knowledge of a fact, circumstance, event or other matter by Richard Beckert, Donald Padgett, Thomas Henslee, Dick Higginbotham, George Blonsky, Bradley Kocher, Harry Moulter, John Longstreet, John Beckert and Jeff Mayer, or the knowledge an individual in the same or similar position could be expected to discover or otherwise become aware of after reasonable inquiry regarding the accuracy of any representation or warranty contained in this Agreement.

“ 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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“ Tax ” means (i) all taxes, levies, assessments, duties, imposts or other like assessments, charges or fees (including estimated taxes, charges and fees), including income, profits, corporations, advance corporation, 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, including any interest, penalties or additions to tax applicable or related thereto, (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.

“ WARN Act ” means the Worker Adjustment and Retraining Notification Act of 1988, as amended.

1.2 List of Defined Terms . The following terms are used in this Agreement as defined in the Preamble, the Recitals, or the Articles or Sections set forth opposite such terms:

 

 

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ARTICLE II

PURCHASE AND SALE OF THE INTERESTS

2.1 Purchase and Sale of the Interests . On and subject to the terms and conditions of this Agreement, Purchaser shall purchase from Pinehurst Company, and Pinehurst Company shall sell or shall cause its Affiliates to Purchaser, all of the Interests, free and clear of all Liens, for the consideration specified in this Article II .

 

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2.2 Purchase Price .

(a) The aggregate purchase price to be paid for the Interests will be $325,000,000 (the “ Base Purchase Price ”):

(i) plus (A) the Cash Amount and (B) the Commitment Fee (provided that the Commitment Fee shall only be added to the Purchase Price if the New Loan Agreement is closed prior to or simultaneously with the Closing);

(ii) minus (A) the Balance Sheet Liabilities, and (B) the aggregate amount of any cash actually received (including insurance proceeds) by any of the Pinehurst Entities, ClubCorp or Pinehurst Company, or to be received by ClubCorp or any of its Affiliates other than the Pinehurst Entities, on account of any Assets sold, disposed of or rendered unusable (with the exception of Assets sold, disposed of or rendered unusable in the Ordinary Course of Business), at any time after the date of this Agreement and prior to the Closing; and

(iii) plus or minus the Capital Expenditure Adjustment (the Base Purchase Price, as adjusted, the “ Purchase Price ”).

(b) Set forth on Exhibit D hereto is a form of the Estimated Purchase Price Certificate, set forth in the form in which such certificate will be delivered prior to the Closing, that has been prepared by ClubCorp based on the financial statements of the Pinehurst Entities as of the end of the month immediately preceding the month in which this Agreement is signed, and, as if, the Closing had occurred on such date (the “ Hypothetical Estimated Purchase Price Certificate ”). At the Closing, Purchaser shall pay to Pinehurst Company, in the manner described in Section 2.5(a) , an amount equal to the Purchase Price, as estimated by ClubCorp (including an estimate of the components of the Purchase Price) on the Estimated Purchase Price Certificate, and as accepted by Purchaser in its sole discretion (which acceptance shall be deemed an acceptance to use such determination for purposes of Closing but shall not be construed as an agreement with ClubCorp and Pinehurst Company as to the actual Purchase Price or any components thereof) not less than two (2) days prior to the Closing (the “ Estimated Purchase Price ”), minus the Escrow Amount.

(c) Within ten (10) days following the Closing Date, Purchaser shall deliver to the Stockholders’ Representative a balance sheet of the Pinehurst Entities (in its final and binding form, the “ Closing Balance Sheet ”), setting forth the components of the Purchase Price and a certificate setting forth the resulting Purchase Price calculated with reference thereto (in its final and binding form, together with the Closing Balance Sheet, the “ Purchase Price Calculation ”). The Closing Balance Sheet shall include all known adjustments required in a year-end closing of the books and shall be prepared based upon a balance sheet of the Pinehurst Entities prepared in accordance with GAAP. ClubCorp, Pinehurst Company and the Stockholders’ Representative shall cooperate as reasonably requested in connection with Purchaser’s preparation of the Purchase Price Calculation. During the ten (10)-day period immediately following the Stockholders’ Representative’s receipt of the Purchase Price Calculation, the Stockholders’ Representative and its agents shall be permitted to review the Pinehurst Entities’ books and records and the Pinehurst Entities’ working papers related to the preparation of the Purchase Price Calculation and determination of the Purchase Price. The

 

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Purchase Price Calculation shall become final and binding upon the Parties ten (10) days following the Stockholders’ Representative’s receipt thereof unless the Stockholders’ Representative gives written notice of its disagreement (a “ Statement of Objections ”) to Purchaser prior to such date. Any Statement of Objections shall specify in reasonable detail the nature and dollar amount of any disagreement so asserted and shall be delivered only if (and to the extent that) the Stockholders’ Representative reasonably and in good faith determines that the Purchase Price Calculation and the resulting Purchase Price calculated with reference thereto delivered by Purchaser has not been determined in accordance with the guidelines and procedures set forth in this Agreement. If a timely Statement of Objections is received by Purchaser, then the Purchase Price Calculation (as revised in accordance with clause (x) or (y) below) shall become final and binding upon the Parties on the earliest of (x) the date the Parties resolve in writing any differences they have with respect to the matters specified in the Statement of Objections, or (y) the date all matters in dispute are finally resolved in writing by the Arbitrator. During the 10 days following delivery of a Statement of Objections, the Parties shall seek in good faith to resolve in writing any differences that they have with respect to the matters specified in the Statement of Objections. If all differences are not resolved, at the end of the 10-day period referred to above, the Parties shall submit to a mutually satisfactory independent reputable consulting firm or a mutually satisfactory independent reputable accounting firm for review and resolution of all matters (but only such matters) that remain in dispute and that were properly included in the Statement of Objections. If the Parties are unable to mutually agree upon a consulting firm or an accounting firm, Purchaser and the Stockholders’ Representative shall select by lot a reputable accounting or consulting firm. The Parties shall instruct the consulting firm or accounting firm ultimately agreed upon or selected by lot under this Section 2.2(c) (the “ Arbitrator ”) to make a final determination of the components of the Purchase Price and the resulting Purchase Price calculated with reference thereto to the extent such amounts are in dispute, in accordance with the guidelines and procedures set forth in this Agreement. The Stockholders’ Representative, Purchaser, ClubCorp and Pinehurst Company will cooperate with the Arbitrator during the term of its engagement. The Stockholders’ Representative and the Parties shall instruct the Arbitrator not to assign a value to any item in dispute greater than the greatest value for such item assigned by Purchaser, on the one hand, or the Stockholders’ Representative, on the other hand, or less than the smallest value for such item assigned by Purchaser, on the one hand, or the Stockholders’ Representative, on the other hand. The Stockholders’ Representative and the Parties shall also instruct the Arbitrator to make its determination based solely on presentations by Purchaser and the Stockholders’ Representative that are in accordance with the guidelines and procedures set forth in this Agreement (i.e., not on the basis of an independent review). The Purchase Price Calculation and the determination of the components of the Purchase Price and the resulting Purchase Price calculated with reference thereto shall become final and binding on the Parties on the date the Arbitrator delivers its final resolution in writing to the Parties (which final resolution shall be requested by the Parties to be delivered not more than fifteen (15) days following submission of such disputed matters). The fees and expenses of the Arbitrator shall be borne by the Parties based upon the relative merits of their claims as determined by the Arbitrator.

(d) Promptly after the Purchase Price Calculation and the determination of the Purchase Price becomes final and binding on the Parties under Section 2.2(c) above, the Estimated Purchase Price shall be recalculated by giving effect to the final and binding

 

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components of the Purchase Price (as recalculated, the “ Final Purchase Price ”). If the Estimated Purchase Price is greater than the Final Purchase Price, then the Stockholders’ Representative shall direct the Escrow Agent to pay from the Escrow Account, in immediately available funds, the amount of such difference to Purchaser. After the distribution (if any) of such amount, the Stockholders’ Representative shall direct the Escrow Agent to pay the balance of the Escrow Account (if any) to the Exchange Agent for the benefit of the holders of ClubCorp stock immediately prior to the Closing, which shall be distributed to such stockholders as soon as reasonably practicable in the same manner as funds were distributed to such stockholders pursuant to the terms of the ClubCorp Merger Agreement. The Stockholders’ Representative may, but is not obligated to, report and withhold any Taxes as it determines may be required by any Law or regulation in effect at the time of any distribution. For the avoidance of doubt, neither ClubCorp, Pinehurst Company nor any of their Affiliates or current or former stockholders shall be required to pay any amount to Purchaser in connection with this Section 2.2(d) .

2.3 Escrow Account . On the Closing Date, Purchaser shall pay the Escrow Amount to the Escrow Agent by wire transfer to the Escrow Account of immediately available funds in accordance with the terms of this Agreement, which funds will cover any amounts that may be owed by ClubCorp or Pinehurst Company under Section 2.2(d) . Any payment to be made by or on behalf of Pinehurst Company pursuant to Section 2.2(d) shall be paid by release of funds to the Purchaser within five (5) Business Days after the date notice of any sums due and owing is given to the Escrow Agent by Purchaser and shall accordingly reduce the Escrow Amount.

2.4 Tax Treatment of Payments . Any payments made with respect to adjustments made pursuant to Section 2.2 shall be deemed to be, and each of the Parties agrees to treat such payments as, an adjustment to the Purchase Price for federal, state, local and foreign income Tax purposes.

2.5 Deliveries . At the Closing:

(a) (i) Purchaser shall pay to Pinehurst Company an amount equal to the Purchase Price (minus the Escrow Amount and the Indebtedness Overage), and (ii) Pinehurst, Inc. shall pay to Pinehurst Company, on behalf of Purchaser, an amount equal to the Indebtedness Overage, each in cash by wire transfer of immediately available funds to an account designated by ClubCorp or Pinehurst Company at least two (2) Business Days prior to the Closing Date;

(b) Purchaser shall pay to the Escrow Agent an amount equal to the Escrow Amount, in cash by wire transfer of immediately available funds to an account designated by the Escrow Agent at least two (2) Business Days prior to the Closing Date;

(c) Pinehurst Company shall deliver to Purchaser the certificates representing the Interests, if any, duly endorsed in blank or accompanied by duly executed interest assignments;

 

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(d) ClubCorp and Pinehurst Company will deliver to Purchaser the various certificates, instruments and documents referred to in Section 8.2 below;

(e) Purchaser will deliver to ClubCorp and Pinehurst Company the various certificates, instruments and documents referred to in Section 8.3 below; and

(f) ClubCorp and Pinehurst Company shall deliver to Purchaser all corporate books and records and other property of the Pinehurst Entities in their possession.

2.6 Closing . The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place at the offices of Thompson & Knight LLP, 1700 Pacific Avenue, Suite 3300, Dallas, Texas 75201 at 10:00 a.m. local time on such date as is mutually agreed to by the Parties (the “ Closing Date ”).

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF CLUBCORP AND PINEHURST

COMPANY

Each of ClubCorp and Pinehurst Company, jointly and severally, represents and warrants to Purchaser as follows with respect to ClubCorp and Pinehurst Company:

3.1 Existence and Good Standing . Each of ClubCorp and Pinehurst Company is a corporation organized, validly existing and in good standing under the Laws of the State of Delaware. Each of ClubCorp and Pinehurst Company has the requisite power and authority and all necessary governmental approvals 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, except where the failure to have such governmental approvals would not reasonably be expected to have a Material Adverse Effect. Each of ClubCorp and Pinehurst Company 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 where the failure to be so qualified, licensed or in good standing would not reasonably be expected to have a Material Adverse Effect.

3.2 Authority . Each of ClubCorp and Pinehurst Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by ClubCorp and Pinehurst Company and the consummation by ClubCorp and Pinehurst Company of the transactions contemplated hereby have been duly and validly authorized by all necessary action. This Agreement has been duly authorized and validly executed and delivered by ClubCorp and Pinehurst Company and (assuming the valid authorization, execution and delivery of this Agreement by Purchaser) constitutes a legal, valid and binding obligation of ClubCorp and Pinehurst Company, enforceable against ClubCorp and Pinehurst 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

 

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other equitable remedies. The affirmative vote of (x) the holders of a majority of all shares of the common stock of ClubCorp issued and outstanding on the record date set for the meeting of ClubCorp’s stockholders to adopt this Agreement and (y) the holders of a majority of all shares of the common stock of ClubCorp issued and outstanding on the record date set for the meeting of ClubCorp’s stockholders to adopt this Agreement who are not Affiliates of Purchaser is the only stockholders’ vote necessary to adopt this Agreement and approve the transactions contemplated hereby (the “ ClubCorp Stockholders Approval ”).

3.3 No Conflict; Required Filings and Consents .

(a) The execution and delivery of this Agreement by ClubCorp and Pinehurst Company do not, and the performance of this Agreement by ClubCorp and Pinehurst Company will not, (i) conflict with or violate any provision of the certificate of incorporation or bylaws of ClubCorp or Pinehurst Company, (ii) assuming that all consents, approvals, authorizations and permits described in Sections 4.3(b) and 5.3(b) have been obtained and all filings and notifications described in Sections 4.3(b) and 5.3(b) have been made and any waiting periods thereunder have terminated or expired, conflict with or violate any Law applicable to ClubCorp or Pinehurst Company or by which any property or asset of ClubCorp or Pinehurst Company 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, bond, mortgage or Permit, except, with respect to clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults, losses or rights that 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, reasonably be expected to have a Material Adverse Effect) is required by or with respect to ClubCorp or Pinehurst Company in connection with the execution and delivery of this Agreement by ClubCorp or Pinehurst Company, or is necessary for the consummation by ClubCorp or Pinehurst Company of the transactions contemplated hereby except under the Exchange Act, the Securities Act, any applicable Blue Sky Laws or as otherwise set forth in Section 3.3(b) of the Disclosure Schedule.

3.4 Brokers’ Fees . Neither ClubCorp, Pinehurst Company nor any of their respective Affiliates has any liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement.

3.5 Interests . Pinehurst Company holds of record and owns beneficially all the Interests, free and clear of all restrictions on transfer (other than restrictions under the Securities Act and state securities Laws) or Liens. At the Closing, Pinehurst Company shall sell to Purchaser good title to the Interests, free and clear of all Liens. Neither ClubCorp nor Pinehurst Company is bound by any option, warrant, purchase right or other contract or commitment that could require ClubCorp or Pinehurst Company to sell, transfer or otherwise dispose of any Interests (other than this Agreement). Neither ClubCorp nor Pinehurst Company is a party to any voting trust, proxy or other agreement or understanding with respect to the voting of any Interests. Assuming the accuracy of Purchaser’s representations in Section 5.6 , the sale of the Interests to Purchaser shall be made in compliance with all federal and state securities Laws.

 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF CLUBCORP AND PINEHURST

COMPANY WITH RESPECT TO THE PINEHURST ENTITIES

Each of ClubCorp and Pinehurst Company, jointly and severally, represents and warrants to Purchaser as follows with respect to the Pinehurst Entities:

4.1 Existence and Good Standing .

(a) Each of the Pinehurst Entities 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. Each of the Pinehurst Entities has the requisite power and authority and all necessary governmental approvals 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, except where the failure to have such governmental approvals would not reasonably be expected to have a Material Adverse Effect. Each of the Pinehurst Entities 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 where the failure to be so qualified, licensed or in good standing would not reasonably be expected to have a Material Adverse Effect.

(b) None of the Pinehurst Entities holds an equity interest in any Person other than of a Pinehurst Entity. Except as set forth in Section 4.1(b)(i) of the Disclosure Schedule, Pinehurst Company is the direct or indirect owner of all of the issued and outstanding Interests of each of the Pinehurst Entities, and all of the Interests are duly authorized, validly issued, fully paid and nonassessable. Except as set forth in Section 4.1(b)(ii) of the Disclosure Schedule, all of the Interests of each of the Pinehurst Entities owned directly or indirectly by Pinehurst Company are free and clear of all restrictions on transfer (other than restrictions under the Securities Act and state securities Laws) or Liens (other than Permitted Encumbrances).

(c) ClubCorp and Pinehurst Company have made available to Purchaser copies of all certificates or articles of incorporation, bylaws and other organizational documents of each of the Pinehurst Entities, as currently in effect.

4.2 No Conflict; Required Filings and Consents .

(a) Neither the execution and delivery of this Agreement nor the performance of this Agreement by ClubCorp and Pinehurst Company will (i) conflict with or violate any provision of the constituent documents of the Pinehurst Entities, (ii) assuming that all consents, approvals, authorizations and permits described in Sections 3.3(b) and 5.3(b) have been obtained and all filings and notifications described in Sections 3.3(b) and 5.3(b) have been made and any waiting periods thereunder have terminated or expired, conflict with or violate any Law

 

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applicable to the Pinehurst Entities or by which any property or asset of any of the Pinehurst Entities 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, bond, mortgage or Permit, except, with respect to clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults, losses or rights that 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, reasonably be expected to have a Material Adverse Effect) is required by or with respect to the Pinehurst Entities in connection with the execution and delivery of this Agreement or is necessary for the consummation by the Pinehurst Entities of the transactions contemplated hereby except under the Exchange Act, the Securities Act, any applicable Blue Sky Laws or as otherwise set forth in Section 4.2(b) of the Disclosure Schedule.

4.3 Brokers’ Fees . Neither the Pinehurst Entities nor any of their respective Affiliates has any liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement.

4.4 Capitalization of the Pinehurst Entities . Section 4.4 of the Disclosure Schedule sets forth for each of the Pinehurst Entities: (i) its name and jurisdiction of organization, (ii) the names and respective ownership interests of the holders thereof, and (iii) the amount and type of authorized and outstanding equity of each Pinehurst Entity as of the date hereof. Each Person so indicated on Section 4.4 of the Disclosure Schedule is and will be on the Closing Date the record and beneficial owners and holders of the equity interests of the Pinehurst Entities owned by each of them, free and clear of all restrictions on transfer (other than restrictions under the Securities Act and state securities Laws) or Liens (other than Permitted Encumbrances). There are no contracts relating to the issuance, sale or transfer of any equity securities or other securities of any of the Pinehurst Entities. None of the outstanding equity securities of each of the Pinehurst Entities was issued in violation of the Securities Act or any other Law.

4.5 Assets . The Pinehurst Entities have (or, with respect to those Assets on Exhibit B , will have as of the Closing) good and marketable title to the Assets (other than Assets leased by the Pinehurst Entities), free of all Liens other than Permitted Encumbrances. Assuming the execution of the Ancillary Agreements, the Assets include all assets that are necessary to permit the Pinehurst Entities to conduct the Business in substantially the same manner as such business is currently being conducted. Except as set forth on Section 4.5 of the Disclosure Schedule, as of the date of this Agreement, there are no unpaid bills for labor, services or work performed or rendered, or for materials or supplies furnished or delivered to a Pinehurst Entity, which are reasonably likely to result in the filing of mechanics’, materialmen’s or laborers’ Liens upon the Assets except for labor, services or work contracted, performed or rendered either in the Ordinary Course of Business (including in connection with capital expenditures made pursuant to the Planned Capital Expenditures Schedule) or otherwise specifically permitted under this Agreement. Since April 18, 2006 and prior to the date hereof, no Asset has been sold, disposed of or rendered unusable (with the exception of Assets sold, disposed of or rendered unusable in the Ordinary Course of Business).

 

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4.6 Permits; Compliance with Law .

(a) Section 4.6(a) of the Disclosure Schedule contains a true and complete list of all material permits, licenses or other similar authorizations required, in accordance with the Laws of any Governmental Entity, in connection with the continued conduct of the Business (the “ Permits ”). A Pinehurst Entity is the authorized legal holder of each of the Permits. Each of the Permits is valid and in full force and effect, and each of the Pinehurst Entities has been and is in compliance in all material respects with the Permits. There exists no violation, suspension, revocation or non-renewal of any of the Permits that has not been cured or dismissed. No Governmental Entity has instituted any proceedings for the cancellation, non-renewal or modification of any of the Permits, and no such proceedings have been threatened in writing or, to the Sellers’ Knowledge, otherwise.

(b) Except as set forth on Section 4.6(b) of the Disclosure Schedule, (i) the Pinehurst Entities are in material compliance with, and for the past three (3) years have been in material compliance with, all Laws, and during the past three (3) years have received no notice of any material violation of any Laws, (A) that apply to the Pinehurst Entities or their operations, including those Laws relating to zoning and land use, product quality and safety, and employment and labor matters, or (B) with respect to which compliance is a condition of engaging in any aspect of conducting operations by the Pinehurst Entities.

(c) Except as set forth on Section 4.6(c) of the Disclosure Schedule, the Pinehurst Entities have not received any written notice of any violation of declaration of covenants, conditions or restrictions or other similar agreements recorded against the Real Property, and no such violation has been threatened, which has not been cured or dismissed and with which the non-compliance would result in a Material Adverse Effect.

4.7 Financial Statements .

(a) Section 4.7(a) of the Disclosure Schedule contains (i) unaudited balance sheets and statements of income, changes in shareholders’ equity and cash flows of the Pinehurst Entities as of the end of the fiscal year for 2005, 2004 and 2003 (the “ Financial Statements ”); and (ii) the unaudited statements of income, changes in shareholders’ equity and cash flows of each of the Pinehurst Entities (the “ Interim Financial Statements ”) as of and for the interim period ended July 11, 2006.

(b) Except as set forth on Section 4.7(a) of the Disclosure Schedule, the Financial Statements, the Interim Financial Statements and the Monthly Financial Statements fairly present (or will fairly present) in all material respects the financial condition and the results of operations, changes in shareholders’ equity and cash flows of the Pinehurst Entities as at the respective dates of and for the periods referred to in such statements. Each of the Financial Statements, the Interim Financial Statements and the Monthly Financial Statements have been and will be prepared from and are in accordance with the Pinehurst Entities’ financial books and

 

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records. Notwithstanding the foregoing, the Interim Financial Statements and Monthly Financial Statements are subject to normal year-end adjustments, and the Financial Statements, the Interim Financial Statements and the Monthly Financial Statements lack footnotes.

4.8 Absence of Certain Changes and Events . Since December 31, 2005, there has not been any Material Adverse Effect, and no event has occurred or circumstance exists that may result in such a Material Adverse Effect. Except for (i) liabilities incurred in connection with this Agreement, the ClubCorp Merger Agreement or the transactions contemplated hereby or thereby, or (ii) as set forth in Section 4.8 of the Disclosure Schedule, since December 31, 2005, the Pinehurst Entities have conducted their respective businesses only in the Ordinary Course of Business and there has not been any:

(a) change in any of the Pinehurst Entities’ authorized or issued capital stock, grant of any stock option or right to purchase shares of capital stock of the Pinehurst Entities or issuance of any security convertible into such capital stock;

(b) amendment to the organizational documents of the Pinehurst Entities;

(c) payment or increase by the Pinehurst Entities of any bonuses, salaries or other compensation to any director, officer or Employee or entry into any employment, severance or similar Contract with any director, officer or Employee, except as required by pre-existing Contracts or in the Ordinary Course of Business;

(d) adoption of, amendment to or increase in the payments to or benefits under any Employee Plan, except in the Ordinary Course of Business or as required by applicable Law;

(e) damage to or destruction or loss of any asset of the Business, whether or not covered by insurance, in which the amount with respect to the damage or destruction of such asset exceeded $50,000 individually;

(f) entry into, termination of or receipt of notice of termination of (i) any material Permit, distributorship, dealer, sales representative, joint venture, credit or similar Contract to which any of the Pinehurst Entities is a party, or (ii) any Contract or transaction involving a total remaining commitment by any of the Pinehurst Entities of at least $75,000;

(g) sale (other than in the Ordinary Course of Business), lease or other disposition of any of the Pinehurst Entities’ Assets (including tangible assets and the Intellectual Property) or the creation of any Lien on any Asset of the Pinehurst Entities with an aggregate value of at least $25,000;

(h) cancellation or waiver of any claims or rights with a material value to any of the Pinehurst Entities;

(i) indication by any material supplier to any of the Pinehurst Entities of an intention to discontinue or change the terms of its relationship with the Pinehurst Entities;

 

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(j) material change in the accounting methods used by the Pinehurst Entities; or

(k) agreement by the Pinehurst Entities to do any of the foregoing.

4.9 Employee Benefit Plans .

(a) Section 4.9(a) of the Disclosure Schedule sets forth a complete and accurate list of each Pinehurst Benefit Plan and each Parent Benefit Plan. With respect to each Pinehurst Benefit Plan and each Parent Benefit Plan, ClubCorp or Pinehurst Company has delivered or made available to Purchaser true, accurate and complete copies of the following documents: (i) the plan documents, including all amendments thereto, and related trust documents or documents comprising other funding arrangements, as applicable (or, with respect to any such plan that is unwritten, a written description of said plan); (ii) all collective bargaining agreements pursuant to which contributions to any Pinehurst Benefit Plan or Parent Benefit Plan are being made or obligations are owed by the Pinehurst Entities; (iii) the most recent summary plan descriptions, summaries of material modifications and memoranda, employee handbooks and other material written communications concerning personnel practices and procedures provided to Employees; (iv) the most recent report on Form 5500, including attachments, to the extent applicable; and (v) any affirmative action plans applicable to any Employee.

(b) Except to the extent disclosed on Section 4.9(b) of the Disclosure Schedule: (i) each of the Pinehurst Entities has performed all material obligations, whether arising by operation of Law or by contract, including ERISA and the Code, required to be performed by it in connection with the Pinehurst Benefit Plans, and, to the Sellers’ Knowledge, there have been no defaults or violations of Law, contract or tax qualification requirements with respect to the Pinehurst Benefit Plans or the Parent Benefit Plans that could result in material liability to the Pinehurst Entities; (ii) each Pinehurst Benefit Plan has been maintained in compliance with its terms and with the requirements prescribed by all applicable Laws in all material respects; (iii) there are no actions, suits or claims pending (other than routine claims for benefits) or, to the Sellers’ Knowledge, contemplated or threatened against, or with respect to, any Pinehurst Benefit Plans, Parent Benefit Plans or their assets that could result in material liability to the Pinehurst Entities; (iv) all contributions required to be made to the Parent Benefit Plans and the Pinehurst Benefit Plans have been made timely; (v) there has been no termination or partial termination of any Pinehurst Benefit Plan within the meaning of Section 411(d)(3) of the Code; (vi) no act, omission or transaction has occurred which could result in the imposition on any Pinehurst Entity of (A) material liability for breach of fiduciary duty under Section 409 of ERISA, (B) a material civil penalty assessed pursuant to subsections (c), (i) or (1) of Section 502 of ERISA, or (C) a material tax imposed pursuant to Chapter 43 of Subtitle D of the Code; (vii) to the Sellers’ Knowledge, there is no matter pending with respect to any Parent Benefit Plans or Pinehurst Benefit Plans before the IRS or the Department of Labor that could result in material liability to the Pinehurst Entities; (viii) each Parent Benefit Plan and Pinehurst Benefit Plan may be unilaterally amended or terminated in its entirety without any liability or other obligation (other than accrued vested benefits or benefits otherwise protected by applicable Laws) on the Pinehurst Entities; and (ix) the Pinehurst Entities have no liabilities or other obligations, whether actual or contingent, under any Parent Benefit Plan or Pinehurst Benefit Plan for post-employment benefits of any nature (other than COBRA continuation coverage).

 

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(c) None of ClubCorp, the Pinehurst Entities or any ERISA Affiliate of any Pinehurst Entity contributes to or has an obligation to contribute to, nor has at any time during the past six (6) years contributed to or had an obligation to contribute to, a multiemployer plan within the meaning of Section 3(37) of ERISA or any Benefit Plan subject to Title IV of ERISA or Section 412 of the Code.

(d) With respect to the Parent Benefit Plans and the Pinehurst Benefit Plans, there exists no condition or set of circumstances in connection with the Pinehurst Entities that could be expected to result in liability reasonably likely to have a Material Adverse Effect on the Pinehurst Entities under ERISA, the Code or any other applicable Law. Except as set forth on Section 4.9(d) of the Disclosure Schedule, with respect to the Parent Benefit Plans and Pinehurst Benefit Plans, individually and in the aggregate, there are no unfunded benefit obligations which have not been accounted for by reserves, or otherwise properly footnoted or accrued in accordance with GAAP, on the financial statements of the Pinehurst Entities. Each of the Parent Benefit Plans and the Pinehurst Benefit Plans intended to be qualified under Section 401(a) of the Code either has received a current favorable determination letter from the IRS regarding such qualified status or is maintained under a prototype plan that has been approved by the IRS and with respect to which ClubCorp or the Pinehurst Entities may rely on the opinion letter issued to the prototype sponsor as to the qualified status of such Parent Benefit Plan or Pinehurst Benefit Plan, and each such plan has not been amended, operated or administered in a way which would adversely affect such qualified status.

(e) Except as disclosed on Section 4.9(e) of the Disclosure Schedule, neither the execution nor delivery of this Agreement nor the consummation of the transactions contemplated hereby, will result in any payment becoming due pursuant to a Parent Benefit Plan or a Pinehurst Benefit Plan to any Employee or Former Employee.

(f) No amounts payable or that could become payable under any Parent Benefit Plan or Pinehurst Benefit Plan as a result of the consummation of the transactions contemplated by this Agreement or otherwise shall fail to be deductible by a Pinehurst Entity for Federal income tax purposes by reason of Section 280G of the Code.

4.10 Labor and Employment Matters .

(a) Except as disclosed on Section 4.10(a) of the Disclosure Schedule, none of the Pinehurst Entities is a party to or is presently negotiating any collective bargaining agreement or other labor agreement with any labor union or organization, and to the Sellers’ Knowledge (i) there is no certification petition pending, and there has been no certification petition filed within the previous two (2) years, before the National Labor Relations Board or other Governmental Entity concerning any of the Employees, and (ii) there is no organizational campaign, activity or proceeding by any labor organization (or representative thereof) or employee group (or representative thereof) to organize any of the Employees, and there have been no such campaigns, activities or proceedings within the previous two (2) years.

 

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(b) Except as disclosed on Section 4.10(b) of the Disclosure Schedule, there is no pending or threatened unfair labor practice charge or grievance arising out of a collective bargaining agreement or other grievance procedure against the Pinehurst Entities, and there have been no such charges or grievances within the previous two (2) years.

(c) Except as disclosed on Section 4.10(c) of the Disclosure Schedule, there is no strike, dispute, slowdown, work stoppage, lockout, or other labor controversy in effect, pending, or, to the Sellers’ Knowledge, threatened against or involving any of the Pinehurst Entities, and there have been no such strikes, disputes, slowdowns, work stoppages, lockouts, or other controversies within the previous two (2) years.

(d) Except as disclosed on Section 4.10(d) of the Disclosure Schedule, none of the Pinehurst Entities is a party to any employment or consulting Contract that cannot be terminated at will by and at no expense to the Pinehurst Entities.

(e) Except as disclosed on Section 4.10(e) of the Disclosure Schedule, there is no pending or, to the Sellers’ Knowledge, threatened charge, complaint, lawsuit, investigation, or proceeding in any forum or before any court, tribunal or Governmental Entity against the Pinehurst Entities by or on behalf of any Employee, Former Employee, applicant for employment, or to the Sellers’ Knowledge any Person claiming to have been or to be an Employee, or any classes of the foregoing, alleging breach of any express or implied contract of employment, any Law governing employment and employment practices, including equal employment opportunity, non-discrimination, non-harassment, terms and conditions of employment, wages, employment benefits, hours of work and overtime, labor relations, worker classification, occupational safety and health, employment-related immigration and authorization to work in the United States, notice of plant closings or mass layoffs, employee waivers of liability, and privacy of employee medical information and otherwise, and there have been no such charges, complaints, lawsuits, investigations, or other proceedings within the previous three (3) years.

(f) Except as disclosed on Section 4.10(f) of the Disclosure Schedule, none of the Pinehurst Entities is a party to, or otherwise bound by, any settlement, consent decree, Order, or injunction in respect to any of the Employees.

(g) Except as disclosed on Section 4.10(g) of the Disclosure Schedule, the Pinehurst Entities do not have and are not required to have an affirmative action plan and, with respect to any such plan, the Pinehurst Entities are in compliance with the terms of such plan, such plan complies with applicable Law, and there has been no audit of such plan by the Office of Federal Contract Compliance Programs or other Governmental Entity within the past three (3) years.

(h) Except as disclosed on Section 4.10(h) of the Disclosure Schedule, the Pinehurst Entities are, and have been within the previous three (3) years, in compliance with all applicable Laws respecting employment and employment practices, including equal employment opportunity, non-discrimination, non-harassment, terms and conditions of employment, wages, employment benefits, hours of work and overtime, labor relations, worker classification,

 

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occupational safety and health, employment-related immigration and authorization to work in the United States, notice of plant closings or mass layoffs, employee waivers of liability, and privacy of employee medical information and otherwise, except where the failure to be in such compliance would not have a Material Adverse Effect.

(i) Except as disclosed on Section 4.10(i) of the Disclosure Schedule, none of the Employees, Former Employees, or, to the Sellers’ Knowledge, Persons claiming to have been or be an Employee has a right to be recalled, reinstated, or restored to employment under any collective bargaining agreement, Law, contract, policy, or practice of the Pinehurst Entities.

(j) Except as disclosed on Section 4.10(j) of the Disclosure Schedule, none of the Employees has suffered an “employment loss” (as that term is defined under the WARN Act) since three (3) months before the Closing Date. To the extent there has been a “plant closing” or “mass layoff” (as each term is defined under the WARN Act) within the past three (3) years, the Pinehurst Entities have complied with all the requirements of the WARN Act and any applicable Law regarding notice to Employees.

(k) Except as disclosed on Section 4.10(k) of the Disclosure Schedule, the Pinehurst Entities have complied with the Older Workers’ Benefit Protection Act with respect to any waivers of liability under the Age Discrimination of Employment Act within the previous two (2) years, except where the failure to be in such compliance would not have a Material Adverse Effect.

(l) Except as disclosed on Section 4.10(l) of the Disclosure Schedule, the Pinehurst Entities have complied with the Health Insurance Portability and