EXHIBIT 2.1
EXECUTION COPY
KSL RECREATION CORPORATION
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STOCK PURCHASE AGREEMENT
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Dated as of February 12, 2004
by and among
KKR PARTNERS II, L.P.,
KKR 1996 FUND, L.P.,
RESORT ASSOCIATES, L.P., and
GOLF ASSOCIATES, L.P.
as Sellers
and
CNL RESORT ACQUISITION CORP.
as Purchaser
and
KSL RECREATION CORPORATION
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Table of Contents
Page
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ARTICLE I. PURCHASE AND SALE OF THE
SHARES..............................................2
1.01
Delivery
and Purchase of
Shares..............................................2
1.02
Consideration for
Shares.....................................................2
1.03
Deposit......................................................................9
1.04
Treatment
of
Options........................................................10
ARTICLE II.
CLOSING.....................................................................11
2.01
Date of
Closing.............................................................11
2.02
Deliveries..................................................................11
ARTICLE III. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
AND OF
SELLERS.....................................................................11
3.01
Capitalization of the Company and Title to
Shares...........................11
3.02
Subsidiaries................................................................12
3.03
Authorization of
Agreement..................................................13
3.04
No
Conflicts................................................................14
3.05
No
Consents.................................................................15
3.06
Compliance
with
Laws........................................................15
3.07
Litigation..................................................................16
3.08
No
Brokers..................................................................16
3.09
Organization and
Authority..................................................17
3.10
Financial
Statements........................................................17
3.11
Undisclosed
Liabilities.....................................................18
3.12
Intellectual
Property.......................................................18
3.13
Contracts
and
Commitments...................................................19
3.14
Employee
Benefits...........................................................20
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3.15
Absence of
Certain
Changes..................................................23
3.16
Taxes.......................................................................25
3.17
Transactions with
Affiliates................................................26
3.18
Insurance...................................................................26
3.19
Environmental
Matters.......................................................27
3.20 Real
Estate.................................................................28
3.21
Hart-Scott-Rodino
Act.......................................................32
3.22
Labor
Relations;
Compliance.................................................32
3.23
Questionable
Payments.......................................................33
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF
PURCHASER.................................34
4.01
Organization of
Purchaser...................................................34
4.02
Authorization of
Agreement..................................................34
4.03
No
Conflicts................................................................34
4.04
No
Consents.................................................................35
4.05
Litigation..................................................................35
4.06
No
Brokers..................................................................35
4.07
Investment
Purpose..........................................................35
4.08
Purchaser's
Examination.....................................................35
4.09
Financial
Ability...........................................................36
ARTICLE V. FURTHER AGREEMENTS OF THE
PARTIES...........................................36
5.01
Payments
and Release of Holdback
Amounts....................................36
5.02
Liabilities.................................................................40
5.03
Expenses....................................................................43
5.04
Resignations................................................................44
5.05
Interim
Management
Agreement................................................44
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5.06
Real
Estate.................................................................44
5.07
Further
Assurances..........................................................48
5.08
Correspondence..............................................................49
5.09
Record
Retention............................................................49
5.10
Regulatory
and Other
Authorizations.........................................49
5.11
Conduct of
Business Pending the
Closing.....................................50
5.12
No
Disclosure...............................................................53
5.13
Transfer
Taxes..............................................................54
5.14
Reasonable
Efforts to
Close.................................................54
5.15
Access to
the Company and its
Subsidiaries..................................54
5.16
Section
280G of the
Code....................................................55
5.17
Financing...................................................................56
5.18
Non-Competition
Agreement...................................................56
5.19
Guest Data
and
Database.....................................................56
5.20
Employee
Hiring
Assistance..................................................57
5.21
Transfer
of Blue View II
LLC................................................57
5.22
La Quinta
Declarations......................................................57
ARTICLE VI. CONDITIONS TO
CLOSING.......................................................58
6.01
Conditions
to
Closing.......................................................58
6.02
Documents
to be Delivered by Sellers and the
Company........................59
6.03
Documents
to be Delivered by
Purchaser......................................60
ARTICLE VII.
TERMINATION.................................................................61
7.01
Termination.................................................................61
7.02
Effect of
Termination.......................................................62
ARTICLE
VIII.MISCELLANEOUS...............................................................62
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8.01
Nonsurvival of Representations, Warranties and Certain
Covenants............62
8.02
Entire
Agreement............................................................63
8.03
Governing
Law; Jurisdiction; Waiver of Jury
Trial...........................64
8.04
Amendment;
Waiver...........................................................65
8.05
Notices.....................................................................65
8.06
Severability................................................................67
8.07
Assignment
and Binding
Effect...............................................67
8.08
No Benefit
to
Others........................................................67
8.09
No
Recourse.................................................................67
8.10
Enforcement.................................................................67
8.11
Specific
Performance........................................................68
8.12
Counterparts................................................................68
8.13
Interpretation..............................................................68
8.14
Disclosure..................................................................69
8.15
No
Presumption..............................................................69
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SCHEDULES
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Schedule 1.02(a)(xii) Reference
Working Capital Amount
Schedule 1.02(c)(i)
Purchase Price Adjustment
Schedule 3.01(a)
Capitalization/Management Stockholders
Schedule 3.01(b)
Company Stock Options
Schedule 3.02
Subsidiaries
Schedule 3.04
Conflicts
Schedule 3.06
Compliance
with Laws
Schedule 3.07
Litigation
Schedule 3.10(a)(i)
Financial Statements (Audited)
Schedule 3.10(a)(ii)
Financial Statements (Unaudited)
Schedule 3.11
Undisclosed Liabilities
Schedule 3.12
Intellectual Property
Schedule 3.13(a)
Contracts and Commitments
Schedule 3.14(a)
Employee Benefit Plans
Schedule 3.14(e)
Summary of Employee Benefit Plan Information - To Be Provided
Schedule 3.15
Absence of Changes
Schedule 3.16(a)
Taxes
Schedule 3.17
Transactions with Affiliates
Schedule 3.18
Insurance
Schedule 3.19
Environmental Matters
Schedule 3.20(b)
Condemnation Proceedings
Schedule 3.20(d) Real
Property Contracts
Schedule 3.20(e)
Space Leases
Schedule 3.20(g)
Forms of Membership Documents
Schedule 3.20(i)
Personal Property
Schedule 3.20(j)
Artwork
Schedule 3.20(k)(v)
Existing Surveys
Schedule 3.20(k)(vi)
Leased Real Property
Schedule 3.20(k)(viii) Owned Real
Property
Schedule 3.22
Labor Relations
Schedule 5.11(a)
Conduct of Business
Schedule 5.11(c)
Agreements or Arrangements Requiring Purchaser Consent
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STOCK PURCHASE AGREEMENT
AGREEMENT, dated
as of February __, 2004 (this "Agreement"), among KKR
Partners II, L.P., a Delaware limited
partnership ("KKR II"), KKR 1996 Fund,
L.P., a Delaware limited partnership ("1996
Fund"), Resort Associates, L.P., a
Delaware limited partnership ("RA"), and
Golf Associates, L.P. ("GA"), a
Delaware limited partnership (KKR II, 1996
Fund, RA and GA being collectively
referred to herein as "Sellers" and each a
"Seller"), CNL Resort Acquisition
Corp., a Delaware corporation
("Purchaser"), and KSL Recreation Corporation, a
Delaware corporation (the "Company").
WHEREAS, KKR II
owns and shall own as of the Closing Date (as defined
below) 9,562 shares (the "KKR II Shares")
of the issued and outstanding shares
of common stock, par value $.01 per share
of the Company (the "Company Common
Stock"), representing approximately 1.71%
of the issued and outstanding shares
of Company Common Stock; and
WHEREAS, 1996
Fund owns and shall own as of the Closing Date 81,320 shares
(the "1996 Fund Shares") of Company Common
Stock, representing approximately
14.62% of the issued and outstanding shares
of Company Common Stock; and
WHEREAS, RA owns
and shall own as of the Closing Date 393,167 shares (the
"RA Shares") of Company Common Stock,
representing approximately 70.68% of the
issued and outstanding shares of Company
Common Stock; and
WHEREAS, GA owns
and shall own as of the Closing Date 55,960 shares (the
"GA Shares" and, together with the KKR II
Shares, the 1996 Fund Shares and the
RA Shares, the "Seller Shares") of Company
Common Stock, representing
approximately 10.06% of the issued and
outstanding shares of Company Common
Stock; and
WHEREAS, the
persons named on Schedule 3.01(a) attached hereto
(collectively, the "Management
Stockholders" and each a "Management
Stockholder") own as of the date hereof
16,276 shares of Company Common Stock
(including restricted shares), representing
approximately 2.93% of the issued
and outstanding shares of Company Common
Stock (the shares held by the
Management Stockholders on the Closing
Date, the "Management Shares" and,
together with Seller Shares, the
"Shares");
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WHEREAS, the
Shares constitute 100% of the issued and outstanding shares of
capital stock of the Company as of the date
hereof, and
WHEREAS,
Purchaser desires to purchase all of the outstanding capital
stock
of the Company owned by Sellers and the
Management Stockholders, on the terms
and conditions set forth herein.
NOW, THEREFORE
in consideration of the mutual covenants and the respective
representations and warranties contained
herein, the parties hereby agree as
follows:
ARTICLE I. PURCHASE AND SALE OF THE
SHARES.
1.01 Delivery and Purchase of Shares. Upon the terms and subject
to
the conditions of this Agreement, on the
Closing Date (as defined below), (i)
each of Sellers will sell, convey, assign
and transfer to Purchaser or its
designee certificates evidencing the Seller
Shares, and (ii) Purchaser shall
acquire from the Management Stockholders
the Management Shares, to the extent
such Management Shares have been delivered
to the Escrow Agent (as defined
below) in accordance with Section 5.01;
provided that Purchaser shall not be
obligated to purchase any Management Shares
that are not delivered by the holder
thereof free of any Liens (as defined
below) (except Liens arising as a result
of an act on the part of Purchaser). Such
certificates evidencing the Company
Common Stock shall be duly endorsed in
blank, or be accompanied by appropriate
stock transfer powers duly executed in
blank, with all necessary stock transfer
tax stamps affixed and canceled.
1.02 Consideration for Shares. (a) Definitions. For purposes of
this
Agreement, the terms below shall have the
following respective meanings:
(i)"1996 Fund Holdback Amount" shall mean the amount equal to
four percent (4%) of the product of (A) an
amount equal to the number of 1996
Fund Shares divided by the Share Number,
multiplied by (B) the Base Purchase
Price.
(ii)"Base Purchase Price" shall mean One Billion Three Hundred
Sixty-Six Million Dollars ($1,366,000,000),
as adjusted pursuant to Section
1.02(c)(i) and as credited for the
Transaction Fees and any liabilities of the
Company or its Subsidiaries, whether
absolute, accrued, contingent or otherwise,
payable after the Closing in connection
with the "Key Employee Retention Plan"
and the "Deferred Cash Bonus Plan"
(relating solely to the payments
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due on January 1, 2005) described on
Schedule 3.11 hereof unless, in either
case, already included in current
liabilities under Section 1.02(c)(i).
(iii)"Capital Stock Subaccount" shall mean with respect to each
Seller, one half of its holdback amount in
connection with the indemnity
obligations under Section 5.02(d).
(iv)"Closing Date" shall mean April 2, 2004, unless otherwise
extended by the parties hereto; provided
that if a temporary injunction or other
temporary or preliminary order of a
Governmental Authority (as defined below)
preventing the consummation of the
transactions contemplated hereby is in
effect, the term Closing Date shall mean
May 3, 2004, unless otherwise extended
by the parties hereto.
(v)"Final Purchase Price" shall mean the Base Purchase Price as
adjusted pursuant to Section
1.02(c)(ii).
(vi)"GA Holdback Amount" shall mean the amount equal to four
percent (4%) of the product of (A) an
amount equal to the number of GA Shares
divided by the Share Number, multiplied by
(B) the Base Purchase Price.
(vii)"KKR II Holdback Amount" shall mean the amount equal to
four percent (4%) of the product of (A) an
amount equal to the number of KKR II
Shares divided by the Share Number,
multiplied by (B) the Base Purchase Price.
(viii)"Management Holdback Amount" shall mean the amount equal
to (A) two percent (2%) of the product of
(1) an amount equal to the number of
Management Shares divided by the Share
Number, multiplied by (2) the Base
Purchase Price; plus (B) the number of
Management Shares which are not
transferred at Closing free and clear of
all Liens (other than Liens arising as
a result of any act on the part of
Purchaser) multiplied by an amount equal to
ninety-eight percent (98%) of the Base
Purchase Price Per Share.
(ix)"Optionholders Holdback Amount" shall mean the amount equal
to (A) two percent (2%) of the product of
(1) an amount equal to the number of
shares of Company Common Stock subject to
Company Stock Options divided by the
Share Number, multiplied by (2) the Base
Purchase Price; plus (B) with respect
to shares of Company Common Stock subject
to Company Stock Options issued and
outstanding on the Closing Date for which
the condition set forth in Section
1.04(c) is not satisfied at the Closing,
(1) the excess, if any, of the Base
Purchase Price Per Share over the exercise
price per share of each such Company
Stock Option,
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minus (2) the portion of the holdback
amount described in clause (A) of this
Section 1.02(a)(ix) applicable to the
Company Option Shares for which the
condition set forth in Section 1.04(c) is
not satisfied at the Closing.
(x)"Percentage Share" means, (A) with respect to each Seller
and
Management Stockholder, a percentage equal
to the quotient of (1) the total
number of shares of Company Common Stock
owned by such person immediately prior
to the Closing, divided by (2) the Share
Number, and (B) with respect to each
Optionholder, a percentage equal to the
quotient of (1) the total number of
shares of Company Common Stock subject to
Company Stock Options owned by such
person immediately prior to the Closing,
divided by (2) the Share Number.
(xi)"RA Holdback Amount" shall mean the amount equal to four
percent (4%) of the product of (A) an
amount equal to the number of RA Shares
divided by the Share Number, multiplied by
(B) the Base Purchase Price.
(xii)"Reference Working Capital Amount" means current assets
determined in accordance with GAAP and as
set forth on Schedule 1.02(a)(xii)
(excluding cash, restricted cash, income
taxes receivable and deposit for
potential acquisition as of December 31,
2003) minus current liabilities
determined in accordance with GAAP and as
set forth on Schedule 1.02(a)(xii)
(excluding current portions of obligations
under capital leases, accrued
corporate wages and deferred bonuses to be
paid at closing, and payable to
affiliates). For purposes of Section
1.02(c)(i), the "Reference Working Capital
Amount" shall be a net liability of
Twenty-Three Million Two Hundred Forty-Nine
Thousand Dollars ($23,249,000).
(xiii)"Share Number" means the sum of (A) the number of shares
of Company Common Stock issued and
outstanding immediately prior to the Closing
plus (B) the number of shares of Company
Common Stock subject to Company Stock
Options issued and outstanding immediately
prior to the Closing.
(xiv)"Working Capital Subaccount" shall mean (X) with respect
to
each Seller, one-half of its holdback
amount, (Y) with respect to each
Management Stockholder, the portion of its
holdback amount described in clause
(A) of the definition of Management
Holdback Amount and (Z) with respect to each
Optionholder, the portion of its holdback
amount described in clause (A) of the
definition of Optionholders Holdback
Amount.
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(b) Closing Date Payments. At the Closing, Purchaser shall pay
by
wire transfer of immediately available
funds: (i) to such account or accounts as
KKR II shall designate in writing to
Purchaser not less than two (2) business
days prior to the Closing Date, an amount
equal to (X) the product of the number
of the KKR II Shares multiplied by the Base
Purchase Price Per Share (against
delivery of certificates evidencing the KKR
II Shares) less (Y) the KKR II
Holdback Amount; (ii) to such account or
accounts for the benefit of KKR II as
the Escrow Agent (as defined below) shall
designate in writing to Purchaser not
less than two (2) business days prior to
the Closing Date, an amount equal to
the KKR II Holdback Amount; (iii) to such
account or accounts as 1996 Fund shall
designate in writing to Purchaser not less
than two (2) business days prior to
the Closing Date, an amount equal to (X)
the product of the number of 1996 Fund
Shares multiplied by the Base Purchase
Price Per Share (against delivery of
certificates evidencing the 1996 Fund
Shares) less (Y) the 1996 Fund Holdback
Amount; (iv) to such account or accounts
for the benefit of 1996 Fund as the
Escrow Agent shall designate in writing to
Purchaser not less than two (2)
business days prior to the Closing Date, an
amount equal to the 1996 Fund
Holdback Amount; (v) to such account or
accounts as RA shall designate in
writing to Purchaser not less than two (2)
business days prior to the Closing
Date, an amount equal to (X) the product of
the number of the RA Shares
multiplied by the Base Purchase Price Per
Share (against delivery of
certificates evidencing the RA Shares) less
(Y) the RA Holdback Amount; (vi) to
such account or accounts for the benefit of
RA as the Escrow Agent shall
designate in writing to Purchaser not less
than two (2) business days prior to
the Closing Date, an amount equal to the RA
Holdback Amount; (vii) to such
account or accounts as GA shall designate
in writing to Purchaser not less than
two (2) business days prior to the Closing
Date, an amount equal to (X) the
product of the number of the GA Shares
multiplied by the Base Purchase Price Per
Share (against delivery of certificates
evidencing the GA Shares) less (Y) the
GA Holdback Amount; (viii) to such account
or accounts for the benefit of GA as
the Escrow Agent shall designate in writing
to Purchaser not less than two (2)
business days prior to the Closing Date, an
amount equal to the GA Holdback
Amount; (ix) to such account or accounts
for the benefit of the Management
Stockholders as the Escrow Agent shall
designate in writing to Purchaser not
less than two (2) business days prior to
the Closing Date, an amount equal to
(X) the product of the number of Management
Shares multiplied by the Base
Purchase Price Per Share (against delivery
of certificates evidencing the
Management Shares) less (Y) the
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Management Holdback Amount; (x) to such
account or accounts for the benefit of
the Management Stockholders as the Escrow
Agent shall designate in writing to
Purchaser not less than two (2) business
days prior to the Closing Date, an
amount equal to the Management Holdback
Amount; (xi) to such account or accounts
for the benefit of the Optionholders (as
defined below) as the Escrow Agent
shall designate in writing to Purchaser not
less than two (2) business days
prior to the Closing Date, an amount equal
to (X) the sum of (1) the product of
the number of shares of Company Common
Stock subject to Company Stock Options
outstanding immediately prior to the
Closing multiplied by the Base Purchase
Price Per Shares minus (2) the aggregate
exercise price of all Company Stock
Options outstanding immediately prior to
the Closing (against presentation of
the applicable document pursuant to Section
1.04(c)) less (Y) the Optionholders
Holdback Amount; and (xii) to such account
or accounts for the benefit of the
Optionholders as the Escrow Agent shall
designate in writing to Purchaser not
less than two (2) business days prior to
the Closing Date, an amount equal to
the Optionholders Holdback Amount. For the
avoidance of doubt, the sum of all of
the payments described in this Section
1.02(b) shall equal the Base Purchase
Price.
(c) Purchase Price Adjustment.
(i) At least two (2) business days prior to the Closing Date,
Sellers and Purchaser shall agree on a good
faith estimate of current assets and
current liabilities, as those terms are
defined as of December 31, 2003 under
generally accepted accounting principles in
the United States ("GAAP"), as of
the Closing Date (but without giving effect
to the Closing) (the "Estimated
Working Capital Amount"), which Estimated
Working Capital Amount shall be used
to adjust the Base Purchase Price on the
Closing Date. In the event the parties
cannot agree, the Estimated Working Capital
Amount shall be reasonably
established by Sellers in good faith, after
consultation with Purchaser. Without
limiting the foregoing, "current assets"
for purposes of this Section 1.02(c)(i)
shall include cash (other than cash held in
escrow with respect to the items set
forth on Schedule 1.02(c)(i)), accounts
receivable, income tax receivable,
prepaid expenses (including utilities, real
estate taxes and other prepaid
items), base stock and other supplies,
inventory, deposits, current portion of
notes receivable and other miscellaneous
current assets of the Company and its
Subsidiaries (and, for the avoidance of
doubt, shall also include any assets of
the type excluded in the calculation of
Reference Working Capital Amount
pursuant to Section 1.02 hereof); and
"current liabilities" for purposes of this
Section 1.02(c)(i)
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shall include accounts payable, short-term
debt, accrued and unpaid real estate
taxes, accrued and unpaid interest on any
financings to be assumed by Purchaser,
other accrued liabilities such as payroll,
vacation, employee benefits and
workers compensation claims as well as
customer deposits, deferred income and
other miscellaneous current liabilities of
the Company and its Subsidiaries
(and, for the avoidance of doubt, shall
also include all liabilities of the type
excluded in the calculation of Reference
Working Capital Amount pursuant to
Section 1.02 hereof). If the Estimated
Working Capital Amount exceeds the
Reference Working Capital Amount as of the
Closing Date, the Base Purchase Price
shall be increased by the amount of such
difference. If the Estimated Working
Capital Amount is less than the Reference
Working Capital Amount as of the
Closing Date, the Base Purchase Price shall
be reduced by the amount of such
difference.
(ii) Within ninety (90) days after the Closing Date, Sellers
and
Purchaser shall agree on a final
calculation of current assets and current
liabilities of the Company under GAAP as of
the Closing Date (but without giving
effect to the Closing) (each as calculated
in accordance with Section 1.02(c)(i)
and for the avoidance of doubt, shall
include all assets and liabilities of the
type excluded in the calculation of
Reference Working Capital Amount pursuant to
Section 1.02 hereof), (the "Final Working
Capital Amount"). If the parties
cannot agree on the Final Working Capital
Amount within such ninety (90)-day
period, the Final Working Capital Amount
shall be determined by a nationally
recognized firm of independent public
accountants mutually agreed upon by
Sellers and Purchaser, and the Final
Working Capital Amount determined by such
accountants shall be final and conclusive
for all purposes hereunder. The costs
of such accountants shall be split evenly
between Sellers and Purchaser. The
Final Purchase Price shall be calculated by
readjusting the Base Purchase Price
using the Final Working Capital Amount in
lieu of the Estimated Working Capital
Amount. If the Base Purchase Price paid at
the Closing was in excess of the
Final Purchase Price, Sellers shall
promptly (but in any event within five (5)
business days after the Final Working
Capital Amount has been agreed upon or
determined by the accountants) direct the
Escrow Agent to pay to Purchaser from
the Working Capital Subaccounts, an amount
reflecting the difference between the
Base Purchase Price and the Final Purchase
Price. All such payments shall be
made pro rata (calculated based on
Percentage Share). For the avoidance of
doubt, any payment obligations of KKR II
pursuant to this Section 1.02(c)(ii)
shall be satisfied only out of the Working
Capital Subaccount of the KKR II
Holdback Amount, any payment obligations of
1996 Fund pursuant to this Section
1.02(c)(ii) shall be satisfied only out of
the Working Capital
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Subaccount of the 1996 Fund Holdback
Amount, any payment obligations of RA
pursuant to this Section 1.02(c)(ii) shall
be satisfied only out of the Working
Capital Subaccount of the RA Holdback
Amount, any payment obligations of GA
pursuant to this Section 1.02(c)(ii) shall
be satisfied only out of the Working
Capital Subaccount of the GA Holdback
Amount, any payment obligations of the
Management Stockholders pursuant to this
Section 1.02(c)(ii) shall be satisfied
only out of the Working Capital Subaccount
of the Management Holdback Amount,
and any payment obligations of the
Optionholders pursuant to this Section
1.02(c)(ii) shall be satisfied only out of
the Working Capital Subaccount of the
Optionholders Holdback Amount; provided
that with respect to each Seller,
Management Stockholder and Optionholder,
the payment shall not exceed such
person's Percentage Share of the Working
Capital Subaccount. If the Base
Purchase Price paid at the Closing was less
than the Final Purchase Price,
Purchaser shall promptly (but in any event
within five (5) business days after
the Final Working Capital Amount has been
agreed upon or determined by the
accountants) pay to (i) Sellers and to (ii)
the Escrow Agent for the benefit of
the Management Stockholders and
Optionholders (in accordance with their
Percentage Share) the amount of such
deficiency. This Section 1.02(c)(ii) shall
survive the Closing.
(iii) Notwithstanding anything to the contrary in the
foregoing,
for purposes of calculating the Estimated
Working Capital Amount and the Final
Working Capital Amount (but not the
Reference Working Capital Amount), the
parties or the accountants, as the case may
be, shall assume that all restricted
stock of the Company has vested and that
all Company Stock Options have been
exercised.
(d) If there is a breach of Section 3.07 (after taking into
account
all materiality qualifications, knowledge
qualifiers and baskets) or Section
3.19(a)(iii) (after taking into account all
materiality qualifications,
knowledge qualifiers and baskets) or the
last sentence of Section 3.14(c) (after
taking into account the knowledge
qualifier), in each case, caused by an action,
suit, proceeding or investigation against
the Company or any of its Subsidiaries
commenced after the date hereof, the
parties shall create an additional holdback
from the Base Purchase Price (the
"Supplemental Holdback") which will affect
each of the Sellers, the Management
Stockholders and the Optionholders pro rata
(calculated based on their Percentage
8
<PAGE>
Share). If the parties cannot agree on the
amount of the Supplemental Holdback,
the parties shall refer the matter to an
independent arbitrator mutually
acceptable to the parties (the "Independent
Arbitrator") for a determination of
the amount of Losses (as defined below)
which would reasonably be likely as a
result of a breach of Section 3.07 (after
taking into account all materiality
qualifications, or knowledge qualifiers and
baskets therein), Section
3.19(a)(iii) (after taking into account all
materiality qualifications, or
knowledge qualifiers and baskets therein),
or the last sentence of Section
3.14(c) (after taking into account the
knowledge qualifier) which amount shall
become the amount of the Supplemental
Holdback. The Independent Arbitrator shall
hold a hearing and render his decision,
which shall be final and binding upon
the parties, within ten (10) days following
such referral. Each party hereto
shall be entitled to submit a written brief
to the Independent Arbitrator (with
a copy being simultaneously provided to the
other parties) prior to the hearing.
The costs and expenses of the Independent
Arbitrator shall be borne equally by
Purchaser and the Company. Upon
determination of the Supplemental Holdback, such
amount shall be deposited with the Escrow
Agent. Upon the final and
non-appealable resolution of such action,
suit, proceeding or investigation or
upon the agreement of Sellers and
Purchaser, to the extent the amount of the
Supplemental Holdback is greater than such
Losses as finally determined or
agreed, the amount of such Losses shall be
released to Purchaser and the
remainder shall be released pro rata
(calculated based on Percentage Share) to
Sellers, the Management Stockholders and
the Optionholders. If the amount of the
Supplemental Holdback is less than such
Losses as finally determined or agreed,
the amount of the Supplemental Holdback
shall be released to Purchaser and
Purchaser shall have no further recourse to
Sellers, the Management Stockholders
and the Optionholders.
1.03 Deposit. Simultaneously with the execution of this Agreement
by
the parties, Purchaser shall deliver to an
escrow agent designated by 1996 Fund
for the benefit of Sellers, Management
Stockholders and Optionholders by wire
transfer of immediately available funds, a
deposit in the amount of Seventy-Five
Million Dollars ($75,000,000) (the
"Deposit"), which Deposit shall be deposited
in an interest-bearing account in the
escrow agent's name at a
nationally-recognized banking institution.
Upon Closing, the escrow agent, on
behalf of Sellers, Management Stockholders
and Optionholders, shall refund to
Purchaser an amount equal to the Deposit
plus any interest accrued thereon from
the date the Deposit was deposited by
Sellers ("Accrued Interest"). If this
Agreement is terminated by Sellers under
Section 7.01(a)(ii), then,
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<PAGE>
Sellers shall retain the Deposit and
Accrued Interest as its sole and exclusive
remedy hereunder it being the intent of the
parties hereto that such payment be
treated as liquidated damages. In such
instances, Purchaser shall have no claim
to, or interest in, the Deposit and Accrued
Interest, and the escrow agent shall
distribute the Deposit plus Accrued
Interest to Sellers, Management Stockholders
and Optionholders in a manner agreed to by
Sellers. If this Agreement is
terminated under Section 7.01, in any other
case, then (a) the escrow agent on
behalf of Sellers, Management Stockholders
and Optionholders, shall refund to
Purchaser the amount of the Deposit plus
Accrued Interest and (b) Sellers shall
have no claim to, or interest in, the
Deposit and Seller shall have no remedies
against Purchaser as a result of such
termination.
1.04 Treatment of Options.
(a) On the Closing Date, outstanding options to purchase shares
of
Company Common Stock (the "Company Stock
Options") held by any current or former
employee or director of the Company or any
Subsidiary (collectively, the
"Optionholders" and each an "Optionholder")
granted under any stock option or
stock purchase plan, program or arrangement
of the Company (collectively, the
"Stock Plans") shall immediately vest and
be canceled and each Optionholder
shall be entitled to receive out of the
funds held by the Escrow Agent pursuant
to Section 1.02(b)(xi)(X), in consideration
for the cancellation of all such
Company Stock Options held by such
Optionholder, an amount in cash equal to the
product of (x) the excess, if any, of (i)
the Base Purchase Price Per Share over
(ii) the exercise price per share, if any,
of each such Company Stock Option,
multiplied by (y) the number of shares of
Company Common Stock subject to each
such Company Stock Option held by such
Optionholder, reduced by applicable
withholding tax or other amounts required
to be withheld by applicable law. The
"Base Purchase Price Per Share" shall be an
amount equal to (i) the sum of the
Base Purchase Price and the aggregate
exercise price per share of all Company
Stock Options divided by (ii) the Share
Number.
(b) Except as otherwise agreed by the parties, the Stock Plans
shall
terminate as of the Closing Date.
(c) As a condition to the tender of payment to any Optionholder
hereunder, each Optionholder shall present
their original option grant letter,
option grant agreement, or similar
instrument (or affidavit of ownership and
indemnity reasonably acceptable to
Purchaser), for cancellation, and, upon
payment, Optionholder shall have no further
rights thereunder.
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<PAGE>
ARTICLE II. CLOSING.
2.01
Date of Closing. The closing of the transactions contemplated
hereby (the "Closing") shall take place at
the offices of Simpson Thacher &
Bartlett LLP ("Simpson Thacher"), 425
Lexington Avenue, New York, New York
10017, at 9:00 a.m. (New York City time),
on the Closing Date. For purposes of
this Agreement, all calculations to be made
as of the Closing Date shall be made
as of 11:59 p.m. New York City time on the
Closing Date.
2.02 Deliveries. At the Closing: (i) the parties shall execute
and
deliver to each other the documents
referred to in Sections 6.02 and 6.03
hereof; and (ii) Purchaser shall deliver to
each of KKR II, 1996 Fund, RA, GA
and the Escrow Agent (for the benefit of
KKR II, 1996 Fund, RA, GA, the
Management Stockholders and the
Optionholders) the payments to which they are
entitled to pursuant to Section
1.02(b).
ARTICLE III. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND OF SELLERS.
The Company represents and warrants to Purchaser, and with respect
to
Sections 3.01(c), 3.03(a), 3.04(b), 3.05(b)
and 3.08(b), each Seller with
respect to itself represents and warrants
severally to Purchaser, as follows:
3.01 Capitalization of the Company and Title to Shares. The
authorized capital stock of the Company
consists of 700,000 shares of Company
Common Stock, of which 556,285 shares are
issued and outstanding as of the date
hereof; all of such shares of Company
Common Stock are owned of record by such
holders as set forth on Schedule 3.01(a).
The Shares are validly issued, fully
paid and non-assessable. As of the date
hereof, other than the 556,285 shares of
Company Common Stock outstanding and the
Company Stock Options, there are no
securities outstanding, and (except as
contemplated in Section 5.11(b)(ii)) at
the Closing Date there will not be any
securities outstanding, which are
convertible into, exchangeable for, or
carrying the right to acquire, equity
securities (or securities convertible into
or exchangeable for equity
securities) of the Company, or
subscriptions, warrants, options, calls,
convertible securities, registration or
other rights or other arrangements or
commitments obligating the Company to
issue, transfer or dispose of any of its
equity securities or any ownership interest
therein and there are no pre-emptive
rights in respect of the shares of Company
Common Stock.
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<PAGE>
There are no outstanding obligations of the
Company or any of its Subsidiaries
to repurchase, redeem or otherwise acquire
any shares of Company Common Stock
(other than put rights held by the
Management Stockholders which are exercisable
upon retirement, death or disability and,
in the case of restricted stock,
certain put rights exercisable on or about
January 1, 2005).
(b) As of the date hereof, Company Stock Options are owned of
record
by such holders as set forth on Schedule
3.01(b). As of the date hereof, there
are outstanding Company Stock Options to
acquire 135,501 shares of Company
Common Stock. All of the Common Stock
Options were issued or granted within the
Stock Plans and the Company Stock Options
can be cancelled in accordance with
Section 1.04 without further liability to
the Company (except as provided
herein).
(c) Upon the transfer and delivery of the shares of Company
Common
Stock being sold hereunder by each Seller
to Purchaser at the Closing, Purchaser
will receive good and valid title to such
shares of Company Common Stock, free
and clear of all liens, pledges, charges,
claims, mortgages, deeds of trust,
security interests, restrictions, rights of
first refusal, defects in title, or
other burdens, options or encumbrances of
any kind ("Liens"), and such shares of
the Company Common Stock shall not be
subject to any voting or transfer
restrictions (other than restrictions
generally imposed on securities under U.S.
federal, state or foreign securities
laws).
3.02 Subsidiaries. (a) Except as set forth on Schedule 3.02,
the
Company does not own, directly or
indirectly, any capital stock or any other
equity interest in any corporation,
partnership, trust, limited liability
company or other legal entity, whether
incorporated or unincorporated
(collectively, the "Subsidiaries" and each
a "Subsidiary").
(b) The name, jurisdiction of incorporation, and authorized
capital
stock and issued and outstanding shares of
each of the Subsidiaries is as set
forth on Schedule 3.02. Except as set forth
on Schedule 3.02, the Company owns,
directly or indirectly, all of the issued
and outstanding shares of capital
stock or equity interests of each of the
Subsidiaries (collectively, the
"Subsidiary Shares"), as set forth on
Schedule 3.02, and the Subsidiary Shares
are validly issued, fully paid and
non-assessable. There are not now, and at the
Closing Date there will not be, any
outstanding securities convertible into,
exchangeable for, or carrying the right to
acquire, equity securities (or
securities convertible into or exchangeable
for equity securities) of any of the
Subsidiaries, or subscriptions, warrants,
options, calls, convertible
securities, registration or
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<PAGE>
other rights or other arrangements or
commitments
obligating any Subsidiary to issue,
transfer or dispose of any of its equity
securities or any ownership interest
therein.
(c) The Company has good and valid title to its Subsidiary
Shares
free and clear of any Liens other than
Permitted Exceptions (as defined below)
and free and clear of any covenant,
condition, restriction, voting trust
arrangement or adverse claims (other than
restrictions on transferability
generally imposed on securities under U.S.
federal, state or foreign securities
laws).
3.03 Authorization of Agreement. (a) Each Seller has all
necessary
partnership power and authority to execute,
deliver and perform this Agreement
and has taken all partnership proceedings
necessary to authorize the
consummation of the transactions
contemplated hereby. This Agreement has been
duly executed and delivered by each Seller
and, assuming this Agreement
constitutes the valid and binding
obligation of Purchaser, the Company and each
other Seller, constitutes the valid and
binding obligation of each Seller,
enforceable against each Seller in
accordance with its terms, except as the
enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or
similar laws relating to or affecting
the rights of creditors generally and by
general equitable principles
(regardless of whether such enforceability
is considered in a proceeding in
equity or at law) and by an implied
covenant of good faith and fair dealing.
(b) The Company has all necessary corporate power and authority
to
execute, deliver and perform this Agreement
and has taken all proceedings
necessary to authorize the consummation of
the transactions contemplated hereby.
This Agreement has been duly executed and
delivered by the Company and, assuming
this Agreement constitutes the valid and
binding obligation of Purchaser and
each Seller, constitutes the valid and
binding obligation of the Company,
enforceable against the Company in
accordance with its terms, except as the
enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or
similar laws relating to or affecting
the rights of creditors generally and by
general equitable principles
(regardless of whether such enforceability
is considered in a proceeding in
equity or at law) and by and implied
covenant of good faith and fair dealing.
13
<PAGE>
3.04 No Conflicts. (a) Except as set forth on Schedule 3.04,
neither
the execution, delivery or performance of
this Agreement, nor the consummation
by Sellers of the transactions contemplated
hereby, nor compliance by Sellers
with the terms and provisions hereof, will:
(i) conflict with the organizational
documents of the Company or any Subsidiary;
(ii) conflict with, or result in the
breach or termination of, or constitute a
default (or with notice or lapse of
time or both, constitute a default) under
or result in the termination or
suspension of, or accelerate the
performance required by the terms, conditions
or provisions of, any note, bond, mortgage,
indenture, license, lease,
agreement, commitment or other instrument
which would, in each case, be a
"material contract" under Rule 601 of
Regulation S-K under the Securities
Exchange Act of 1934, as amended (the
"Exchange Act") to which the Company or
any of the Subsidiaries is a party or by
which any of the foregoing is bound;
(iii) constitute a violation by the Company
or any Subsidiary of any statute,
law, rule, regulation, order or ordinance
(collectively, "Laws") of any
governmental authority, commission, board
agency, public body or authority,
domestic or foreign (each, a "Governmental
Authority") applicable to any of the
foregoing; or (iv) result in the creation
or imposition of any Lien on any asset
of the Company or any of its Subsidiaries;
except, in the case of clause (iii),
for such conflicts, violations, defaults,
breaches, terminations, suspensions or
acceleration of performance which, taken as
a whole, would not reasonably be
likely to have a Material Adverse Effect,
and in the case of (iv), for such
Liens which would not impair the value of
assets in excess of Ten Million
Dollars ($10,000,000). "Material Adverse
Effect" means a material adverse effect
on the business, assets, or financial
condition of the Company and its
Subsidiaries taken as a whole other than
(i) a material adverse effect caused by
any change in the economy or the lodging
industry that does not have a
disproportionate effect on the Company and
its Subsidiaries taken as a whole,
(ii) any seasonal change or event or (iii)
a material adverse effect caused by
the announcement of the transactions
contemplated hereby or identity of
Purchaser.
(b) Neither the execution, delivery or performance of this
Agreement,
nor the consummation by each Seller of the
transactions contemplated hereby, nor
compliance by each Seller with the terms
and provisions hereof, will (i)
conflict with, or result in the breach or
termination of, or constitute a
default (or with notice or lapse of time or
both, constitute a default) under or
result in the termination or suspension of,
or accelerate the performance
required by the terms, conditions or
provisions of, any note, bond, mortgage,
indenture, license,
14
<PAGE>
lease, agreement, commitment or other
instrument to which such Seller is a party
or by which such Seller is bound or (ii)
constitute a violation by such Seller
of any Laws of any Governmental Authority
applicable to any of the foregoing,
except where such violation would not
reasonably be likely to have a Material
Adverse Effect.
3.05 No Consents. (a) No consent, approval or authorization of,
or
filing with, or exemption by, any
Governmental Authority is required in
connection with the execution, delivery or
performance by the Company of this
Agreement excluding (i) filings and notices
not required to be given or made
until after the Closing Date, (ii) filings,
at any time, of tax returns, tax
reports and tax information statements,
(iii) any consent, approval,
authorization, exemption or filing, if any,
which Purchaser is required to
obtain or make or (iv) any consent,
approval, authorization, exemption or filing
which, if not obtained or made, would not
reasonably be likely to have a
Material Adverse Effect or would not
prevent or materially delay Sellers from
performing their obligations under this
Agreement in all material respects.
(b) Assuming the accuracy of the representations set forth in
Section
4.07, no consent, approval or authorization
of, or filing with, or exemption by,
any Governmental Authority is required in
connection with the execution,
delivery or performance by Sellers of this
Agreement excluding (i) filings and
notices not required to be given or made
until after the Closing Date, (ii)
filings, at any time, of tax returns, tax
reports and tax information
statements, (iii) any consent, approval,
authorization, exemption or filing, if
any, which Purchaser is required to obtain
or make, (iv) any consent, approval,
authorization, exemption or filing relating
to the operation of the business of
the Company or its Subsidiaries or (v) any
consent, approval, authorization,
exemption or filing which, if not obtained
or made, would not reasonably be
likely to have a Material Adverse Effect or
would not prevent or materially
delay Sellers from performing their
obligations under this Agreement in all
material respects.
3.06 Compliance with Laws. The Company and its Subsidiaries hold
all
permits, licenses, authorizations,
memberships, consents, certificates,
registrations, qualifications, variances,
exemptions, orders, franchises,
approvals or other rights and privileges of
any Governmental Authority necessary
for the lawful conduct of each of their
respective businesses (collectively, the
"Permits"), except where the failure to so
hold has not had, and would not
reasonably be expected to have, a Material
Adverse Effect. Except as set forth
on
15
<PAGE>
Schedule 3.06, the Company and each
Subsidiary are substantially in compliance
with applicable material Laws and the terms
of the material Permits.
3.07 Litigation. Except as covered by insurance policies (subject
to
applicable self-insured retentions) or as
set forth on Schedule 3.07, (i) there
is no action, suit, investigation or
proceeding pending or, to the knowledge of
the Company, threatened which individually
(or in the aggregate to the extent
the action, suit, investigation or
proceeding is related) is reasonably likely
to result in damages payable by the Company
or any Subsidiary in excess of Ten
Million Dollars ($10,000,000) and which
involve the Company or any of its
Subsidiaries before any court or before any
Governmental Authority, or which
would prevent or materially delay the
performance by Sellers of their
obligations hereunder or which seeks to
enjoin or obtain damages in respect of
the consummation of the transactions
contemplated hereby, and (ii) there are no
outstanding orders, rulings, judgments or
decrees by which the Company or any
Subsidiary or any of their respective
assets are bound or subject which,
individually, is reasonably likely to
result in damages payable by the Company
or any Subsidiary in excess of Ten Million
Dollars ($10,000,000). Except as set
forth on Schedule 3.07, there is no action,
suit, proceeding or investigation
that the Company or any Subsidiary
currently intends to initiate by filing a
complaint with any court or Governmental
Authority. Except as set forth on
Schedule 3.07, to the knowledge of the
Company, there are no actions, charges,
indictments or investigations of any of
Sellers or the trustees, officers,
employees or agents of the Company or any
Subsidiary, whether pending or
threatened, which involves allegations of
criminal violation of any Law, in each
case acting on behalf of the Company or any
Subsidiary.
3.08 No Brokers. (a) Except for fees payable to Goldman, Sachs
& Co.,
("GS&Co."), the Company has not
incurred any obligation or liability,
contingent or otherwise, for brokers' or
finders' fees or commissions in
connection with the transactions
contemplated hereby for which the Company
or any of its Subsidiaries is liable.
(b)Sellers have not incurred any obligation or liability,
contingent
or otherwise, for brokers' or finders' fees
or commissions in connection with
the transactions contemplated hereby for
which the Company or any of its
Subsidiaries is liable.
16
<PAGE>
3.09 Organization and Authority. The Company and each of its
Subsidiaries is a corporation or other form
of entity duly organized, validly
existing and in good standing under the
laws of the jurisdiction of its
incorporation or organization with all
requisite corporate power and authority
to own, lease and operate its properties
and assets and to carry on its business
as currently conducted except where the
failure to be so in good standing or to
have any such corporate power and authority
would not reasonably be likely to
have a Material Adverse Effect. The Company
and each of its Subsidiaries is duly
qualified to do business and in good
standing as a foreign entity in the
jurisdictions where the nature of the
property owned or leased by it, or the
nature of the business conducted by it,
makes such qualification necessary,
except where the failure to be so in good
standing or to have such qualification
would not reasonably be likely to have a
Material Adverse Effect. True and
complete copies of the certificate of
incorporation and by-laws of the Company
and each of its Subsidiaries, each as
amended to date, have heretofore been made
available to Purchaser.
3.10 Financial Statements. (a) Attached hereto as Schedule
3.10(a)(i)
are the audited consolidated balance sheets
and statements of income of the
Company as at October 31, 2003 and October
31, 2002, and the related statements
of operations and retained deficit and
statements of cash flows of the Company
for the years then ended (the "Audited
Financial Statements"). Such Audited
Financial Statements were prepared in
accordance with GAAP. In addition,
attached hereto as Schedule 3.10(a)(ii) are
the unaudited consolidated Company
balance sheet as at December 31, 2003, and
the related statements of income and
retained deficit and statements of cash
flows of the Company for the two (2)
months then ended (the "Interim Financial
Statements"). The Audited Financial
Statements and Interim Financial Statements
are hereinafter collectively,
referred to as the "Financial
Statements."
(b) In each case, (i) the Financial Statements have been prepared
in
accordance with GAAP, except for the
absence of full footnote disclosures and
schedules and normal year-end audit
adjustments with respect to Interim
Financial Statements, (ii) the Financial
Statements were prepared by management
of the Company and (iii) the Financial
Statements present fairly in all material
respects, as of their respective dates and
for the periods set forth therein,
the consolidated financial position,
results of operations or cash flows, as the
case may be, of the Company and its
Subsidiaries.
17
<PAGE>
(c) The books of account and other financial records of the
Company
and its Subsidiaries are true, complete and
correct in all material respects,
have been maintained in accordance with
good business practices, and are
accurately reflected in all material
respects in the consolidated financial
statements of the Company.
(d) The books and other records of the Company and its
Subsidiaries
contain in all material respects all
corporate action of the stockholders,
directors and any board committees of the
Company and its Subsidiaries.
3.11 Undisclosed Liabilities. Except for the liabilities: (a)
set
forth on the Financial Statements; (b) set
forth on Schedule 3.11 attached
hereto; (c) the subject matter of which is
covered by any other provisions of
this Article III; or (d) incurred in the
ordinary course of business consistent
with past practice since October 31, 2003,
neither the Company nor any
Subsidiary is subject to any liability,
whether absolute, accrued, contingent or
otherwise and whether due or to become due,
which would reasonably be likely to
have a Material Adverse Effect.
3.12 Intellectual Property. Schedule 3.12 contains an accurate
and
complete description of all registered
trademarks owned by the Company or any
Subsidiary and all existing and pending
federal and state trademark
registrations and applications therefor
other than trademarks using the name
"KSL" (all such registered trademarks and
applications, regardless of whether
they are listed, the "Intellectual
Property"). To the knowledge of Sellers, the
Intellectual Property does not infringe on
any trademarks, copyrights or any
other rights of any person. Except as set
forth on Schedule 3.12, no
registration relating to any Intellectual
Property has lapsed, expired or been
abandoned or canceled by the Company or any
Subsidiary and none of the
Intellectual Property is subject to any
outstanding order, decree, judgment,
stipulation, injunction, written
restriction or agreement restricting the scope
of use thereof, in either case which would
be reasonably likely to have a
Material Adverse Effect. Except as would
not be reasonably likely to have a
Material Adverse Effect, the Company and
its Subsidiaries own, or possess
adequate and enforceable licenses to use,
all material intellectual property
rights necessary to permit the Company and
its Subsidiaries to conduct in all
material respects their business as now
conducted. Except as set forth on
Schedule 3.12, to the knowledge of Sellers,
there are no material infringing or
diluting uses of the Intellectual
18
<PAGE>
Property. Neither the Company nor any
Subsidiary has granted any material
license (other than such licenses and
permissions for one-time or limited use
granted in the ordinary course of business)
to any person or entity to use any
of the Intellectual Property except as
listed on Schedule 3.13(a).
3.13 Contracts and Commitments. (a) Schedule 3.13(a) lists all
Material Contracts (as hereinafter defined)
as of the date hereof. For purposes
of this Agreement, "Material Contracts"
shall mean, other than group sales
contracts (including third party booking
agency agreements), (i) all contracts,
agreements or understandings with
customers, suppliers and distributors of the
Company and the Subsidiaries involving any
payments in an amount in excess of
Five Hundred Thousand Dollars ($500,000)
within a twelve (12) month period; and
(ii) all acquisition, merger, asset
purchase or sale agreements (A) entered into
by Sellers or any of their affiliates
within three (3) years prior to the date
hereof or (B) providing for continuing
payment obligations of the Company or any
of its Subsidiaries; (iii) all agreements
which provide for, or relate to, the
incurrence by the Company or any Subsidiary
of indebtedness for borrowed money
(including any interest rate or foreign
currency swap, cap, collar or hedge
agreements, financial products insurance or
options or forwards on such
agreements, or other similar agreements for
the purpose of managing the interest
rate or foreign exchange risk associated
with its financing); (iv) all
guaranties of the obligations of persons
other than the Company or any
Subsidiary; (v) any settlement agreements
with respect to litigation under which
the Company or any Subsidiary has
continuing material obligations; (vi) all
agreements that limit the ability of any
Subsidiary to pay dividends to its
parent; (vii) all agreements that limit the
ability of the Company or any of its
Subsidiaries to engage in any line of
business or in a business in a geographic
area; (viii) all contracts regarding the
sponsorship of athletic competitions;
and (ix) all other "material contracts"
within the meaning set forth in Item
601(b)(10) of Regulation S-K promulgated
under the Exchange Act.
(b) Neither the Company nor any Subsidiary has given any
irrevocable
power of attorney that is outstanding or
will be in effect on the Closing Date
to any person for any purpose
whatsoever;
(c) Neither the Company nor any Subsidiary is in material
default,
nor to the knowledge of the Company is
there any basis for any claim of material
default, under any of the Material
Contracts. To the knowledge of the Company,
all Material Contracts are in full
force
19
<PAGE>
and effect and are valid and enforceable
against the Company or Subsidiary that
is a party thereto except as enforceability
may be limited by bankruptcy,
insolvency, fraudulent conveyance,
reorganization, moratorium or similar laws
relating to or affecting the rights of
creditors generally and by general
equitable principles (regardless of whether
such enforceability is considered in
a proceeding in equity or at law) and, to
the knowledge of the Company, no other
party is in material default under a
Material Contract;
(d) Sellers have heretofore delivered or made available to
Purchaser
true and correct copies of all of the
Material Contracts; and
(e) No Seller nor any affiliate of any Seller (other than the
Company
or any of its Subsidiaries) is a guarantor
of any obligation of the Company or
any of its Subsidiaries.
3.14
Employee Benefits. (a) Schedule 3.14(a) sets forth a complete
and accurate list of every material Plan
(as hereinafter defined).
(b) Each Employee Program that has been maintained by the Company
or
an Affiliate (as hereinafter defined) of
the Company at any time during the six
(6)-year period prior to the date hereof
(any of the foregoing, a "Plan"), which
has been intended to qualify under Section
401(a) or 501(c)(9) of the Internal
Revenue Code of 1986, as amended, and the
rules and regulations promulgated
thereunder (the "Code"), either (i) has
received a favorable determination or
approval letter from the U.S. Internal
Revenue Service (the "IRS") regarding its
qualification under such section or (ii) is
a prototype plan of a Master &
Prototype plan that has received a
favorable determination or approval letter
from the IRS. No event or omission has
occurred which would reasonably be
expected to cause any Plan that is intended
to be qualified under Section 401(a)
or 501(c)(9) of the Code or that is
otherwise intended to provide tax-favored
benefits under the Code, to lose its
tax-qualification or otherwise fail to
satisfy the relevant requirements to
provide tax-favored benefits under the
applicable Code Section (including Code
Sections 105, 125, 401(a) and
501(c)(9)), respectively. No partial
termination (within the meaning of Section
411(d)(3) of the Code) has occurred with
respect to any Plan to which Section
411(d) of the Code applies, for which any
liability remains unsatisfied.
(c) Except as would not, individually or in the aggregate,
reasonably
be expected to have a Material Adverse
Effect, neither the Company nor any of
its Affiliates has failed to comply with
any applicable laws with respect to the
Plans. With respect to any Plan, there has
been no "prohibited transaction" as
defined in Section 406 of the Employee
Retirement
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Income Security Act of 1974, as amended
("ERISA"), or Code Section 4975 for
which any liability to the IRS, the
Department of Labor and any other applicable
governmental or regulatory agency remains
unsatisfied. All payments and/or
contributions required to have been made
(under the provisions of any agreements
or other governing documents or applicable
law) with respect to all Plans (i)
have been made in a timely manner, (ii)
have been accrued on the Financial
Statements, to the extent required by GAAP,
or (iii) to the extent not timely
made, have been made, and any taxes and/or
penalties for failure to make such
timely payments and/or contributions have
been satisfied. No litigation or
governmental administrative proceeding (or
investigation) or other proceeding
(other than those relating to routine
claims for benefits) is pending or, to the
knowledge of the Company, threatened, with
respect to any Plan.
(d) Except as set forth on Schedule 3.14(a), no Plan (i) is or
was
subject to Title IV of ERISA, Code Section
412 or ERISA Section 302 or (ii)
provides health care or any other
non-pension benefits to any employees of the
Company or its Affiliates after their
employment is terminated (other than as
required by part 6 of subtitle B of Title I
of ERISA) or contains provisions
committing to provide such post-termination
benefits in the future.
(e) Except with respect to those Plans set forth on Schedule
3.14(e),
with respect to each material Plan, true,
complete and accurate copies of the
following documents (if applicable to any
such Plan) have previously been
delivered to the Purchaser: (i) all
documents embodying or governing such Plan,
and any funding medium for the Plan
(including, without limitation, trust
agreements) as they may have been amended
to the date hereof; (ii) the most
recent IRS determination or approval letter
with respect to such Plan or, if the
Plan is a prototype plan, the most recent
IRS determination or approval of the
Master & Prototype plan; (iii) the
three (3) most recently filed IRS Forms 5500,
with all applicable schedules and
accountants' opinions attached thereto; (iv)
the three (3) most recent actuarial
valuation reports completed with respect to
such Plan; (v) the summary plan
descriptions (or other descriptions of such Plan
provided to employees); (vi) any insurance
policy related to such Plans; and
(vii) all material correspondence to and
from any state or federal agency within
the last six (6) years with respect to such
Plan, to the extent such
correspondence addresses a liability of the
Plan or the Company or an Affiliate
that, as of the date hereof, remains
unsatisfied. The Company shall use
reasonable efforts to obtain any of the
foregoing documents that have not, as of
the date hereof, been
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provided to Purchaser within ten (10) days
after the execution of this Agreement
and provide them to Purchaser.
(f) Multiemployer Plans. With respect to each Plan that is a
Multiemployer Plan as described in Section
4001(a)(3) of ERISA ("MPPA Plan"):
(i) all contributions required to be made
with respect to employees of the
Company and its Affiliates have been timely
paid; (ii) the Company has not
incurred, and the Company does not expect
to incur, directly or indirectly, any
withdrawal liability under ERISA with
respect to any such plan (whether by
reason of the transactions contemplated by
the Agreement or otherwise); and
(iii) the Company has not received (and
does not reasonably expect to receive)
notice that any MPPA Plan is insolvent or
in reorganization or that any
accumulated funding deficiency (as defined
in Section 302 of ERISA and Section
412 of the Code), whether or not waived,
exists or is expected to exist with
respect to any such Plan.
(g) Except as set forth on Schedule 3.14(a), there are no
written
employment, stay bonus or severance
agreements with any employee of the Company.
(h)For purposes of this Section:
(i) "Employee Program" means (A) all employee benefit plans
within the meaning of ERISA Section 3(3),
including, but not limited to,
multiple employer welfare arrangements
(within the meaning of ERISA Section
3(40)), plans to which any employer who is
not an Affiliate contributes and
employee benefit plans (such as foreign or
excess benefit plans) which are not
subject to ERISA; (B) all stock option
plans, stock purchase plans, bonus or
incentive award plans, severance pay
policies or agreements, deferred
compensation agreements, supplemental
income arrangements, vacation plans,
payroll practices, and all other employee
benefit plans, agreements, and
arrangements (including any informal
arrangements) not described in (A) above,
including, without limitation, any
arrangement intended to comply with Code
Section 120, 125, 127, 129, 132 or 137; and
(C) all plans or arrangements
providing compensation to employee and
non-employee directors. In the case of an
Employee Program funded through a trust
described in Code Section 401(a) or an
organization described in Code Section
501(c)(9), or any other funding vehicle,
each reference to such Plan shall include a
reference to such trust,
organization or other vehicle.
(ii) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides
benefits under or through such Employee
Program, or has
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any obligation (by agreement or under
applicable law) to contribute to or
provide benefits under or through such
Employee Program, or if such Employee
Program provides benefits to or otherwise
covers employees of such entity (or
their spouses, dependents or
beneficiaries).
(iii) An entity is an "Affiliate" of a person if it would have
ever been considered a single employer with
such person under ERISA Section
4001(b) or part of the same "controlled
group" as such person for purposes of
ERISA Section 302(d)(8)(C).
(iv) "Multiemployer Plan" means an employee pension or welfare
benefit plan to which more than one
unaffiliated employer contributes and which
is maintained pursuant to one or more
collective bargaining agreements.
3.15 Absence of Certain Changes.
Except as and to the extent set forth in Schedule 3.15, between
October 31, 2003 and the date hereof,
neither the Company nor any Subsidiary
has, except in the ordinary course of
business or as otherwise permitted
hereunder:
(a) (i) declared, set aside or paid any dividend or other
distribution payable in property or stock
in respect of any of its capital stock
(except for dividends paid by the
Subsidiaries) or (ii) split, combined or
reclassified any of its capital stock or
issued any other securities in respect
of, in lieu of or in substitution for
shares of its capital stock or amend the
terms of any of its securities or (iii)
directly or indirectly redeemed,
purchased or otherwise acquired any of its
equity securities with property or
stock;
(b) incurred any obligations or liabilities (whether absolute,
accrued or contingent and whether due or to
become due) that are material to the
Company and its Subsidiaries, taken as a
whole;
(c) written off as uncollectible any notes or accounts receivable
or
any portion thereof that are material to
the Company and its Subsidiaries, taken
as a whole;
(d) authorized for issuance, issued, sold, delivered (whether
through
the issuance or granting of options,
warrants, commitments, subscriptions,
rights to purchase or otherwise) any stock
of any class or any other voting
securities (including indebtedness having
the right to vote) or equity
equivalents (including stock options and
stock appreciation rights) (other than
issuances pursuant to the exercise of
Company Stock Options granted prior to the
date of this Agreement) except for the
authorization, issuance or grant of stock
and options to employees of the Company or
its Subsidiaries;
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(e) sold, leased, transferred, mortgaged, pledged, encumbered
or
disposed of any properties or assets,
whether real, personal, fixed, tangible or
intangible, that are material to the
Company and the Subsidiaries, taken as a
whole, except for transfers of the Excluded
Real Properties;
(f) made any commitments for capital assets or acquisitions of
real
property in excess of One Hundred Thousand
Dollars ($100,000) except pursuant to
the Company's and its Subsidiaries'
existing budgets, copies of which have been
provided or made available to Purchaser and
except for the acquisition of the
Transferred Real Properties and the
interests of the JV Affiliates (as defined
below);
(g) except for indebtedness for borrowed money (including letters
of
credit) in the ordinary course of business
under that certain $85,000,000 Credit
Agreement, dated as of May 7, 2003, among
KSL Recreation Group, Inc., as the
Borrower, various financial institutions as
the lenders, and Deutsche Bank Trust
Company Americas, as the Administrative
Agent (the "Credit Agreement"), incurred
or assumed any indebtedness for borrowed
money or guaranteed any such
indebtedness or issued or sold any debt
securities or warrants or rights to
acquire any debt securities of the Company
or any of its Subsidiaries or
guaranteed (or become liable for) any
indebtedness for borrowed money of others;
(h) made any loans, advances or capital contributions that are
material to the Company and its
Subsidiaries, taken as a whole, to persons
(other than the Company or its
Subsidiaries);
(i) reduced insurance coverage in any manner that is material to
the
Company and its Subsidiaries, taken as a
whole;
(j) except as may otherwise be required by applicable law or
regulation, GAAP or the Financial
Accounting Standards Board, (i) changed any of
the accounting principles or practices used
by it in any material respect or
(ii) made any material tax election except
in the ordinary course of business;
(k) except, (i) to the extent required under the terms of the
applicable plan or arrangement or any
employment agreement or severance
arrangement as in effect on the date hereof
or consistent with past practice,
(ii) in the case of newly hired officers or
employees to the extent consistent
with past practice, (iii) in the case of
promotions to fill vacated positions to
the extent consistent with past practice,
(iv) as a result of collective
bargaining, or (v) as required by
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applicable law: (A) entered into, adopted,
amended or terminated any Plan or any
agreement, arrangement, plan or policy
between itself and one or more of its
directors or executive officers, (B)
increased in any manner the compensation or
fringe benefits of any director, officer or
employee except, in the case of
officers and employees, for normal
increases in compensation in the ordinary
course of business or (C) paid or provided
for any severance payment;
(l) materially amended or terminated or waived compliance with
the
terms of or breaches under, any Material
Contract, or enter into a new contract
or agreement or arrangement that would
constitute a Material Contract; or
(m) agreed to take any of the foregoing actions.
3.16 Taxes. Except as set forth in Schedule 3.16(a) or except
for
that which would not, individually or in
the aggregate, involve, or be
reasonably likely to involve, amounts in
excess of Ten Million Dollars
($10,000,000):
(a) Each of the Company and its Subsidiaries has duly and
timely
filed (including pursuant to applicable
extensions) all Tax Returns (as defined
below) required to be filed by it, and paid
in full or made adequate provision
in the Financial Statements of the Company
for all Taxes (as defined below). No
deficiencies for any Taxes have been
proposed or assessed in writing against or
with respect to any Taxes due by or Tax
Returns of the Company or any of its
Subsidiaries; and there are no Liens for
Taxes upon the assets of either the
Company or its Subsidiaries, except for
statutory liens for Taxes not yet due
and payable or Liens for Taxes that are
being contested in good faith by
appropriate proceedings and for which
adequate reserves have been provided.
(i) Neither the Company nor any of its Subsidiaries (A) is or
has ever been a member of an affiliated
group (other than a group the common
parent of which is Company) filing a
consolidated tax return or (B) has any
liability for Taxes of any person arising
from the application of Treasury
Regulation section 1.1502-6 or any
analogous provision of state, local or
foreign law, or as a transferee or
successor, by contract, or otherwise.
(ii) All Taxes required to be withheld, collected or deposited
by or with respect to the Company and each
of its Subsidiaries have been timely
withheld, collected or deposited as the
case may be, and to the extent required,
have been paid to the relevant taxing
authority.
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(b) Effective as of the Closing, neither the Company nor any of
its
Subsidiaries will have any accumulated
earnings and profits (for Federal income
tax purposes) and taking into account any
items of income, gain, deduction and
loss for Federal income tax purposes
properly arising in connection with the
Closing, and neither the Company nor any of
its Subsidiaries will have any
current earnings and profits (for Federal
income tax purposes) for the short
fiscal year which ends or would be deemed
to end on the date of the Closing,
assuming for this purpose that the Company
and each of the Subsidiaries are
treated as "liquidating" in connection with
the Closing in a transaction which
satisfies the requirements of Section 332
of the Code.
(c) Definitions. For purposes of this Agreement the terms below
shall
have the following respective meanings:
(i)
"Taxes" shall mean all taxes, charges, levies, penalties or
other assessments impos
