AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER BY AND AMONG KEY HOSPITALITY ACQUISITION CORPORATION, CAY CLUBS, INC., KEY MERGER SUB INC., KEY MERGER SUB LLC, CAY CLUBS LLC, AND THE MEMBERS OF CAY CLUBS LLC DATED AS OF AUGUST 2, 2007
AMENDED
AND RESTATED
BY
AND AMONG
KEY
HOSPITALITY ACQUISITION CORPORATION,
CAY
CLUBS, INC.,
KEY
MERGER SUB INC.,
KEY
MERGER SUB LLC,
CAY
CLUBS LLC,
AND
THE
MEMBERS OF CAY CLUBS LLC
DATED
AS OF AUGUST 2, 2007
AMENDED
AND RESTATED AGREEMENT AND PLAN OF MERGER
THIS
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this “Agreement”)
is
made and entered into as of August 2, 2007, by and among KEY HOSPITALITY
ACQUISITION CORPORATION, a Delaware corporation (“Key”),
CAY
CLUBS, INC., a Delaware corporation and a wholly owned subsidiary of Key
(“Parent”),
KEY
MERGER SUB LLC, a Florida limited liability company and a wholly owned
subsidiary of Parent (“Key
Merger Sub”),
KEY
MERGER SUB INC., a Delaware corporation and a wholly owned subsidiary of Parent
(“New
Key Merger Sub”
and,
together with Key Merger Sub, the “Merger
Subs”
and
each
a “Merger
Sub”),
CAY
CLUBS LLC, a Florida limited liability company (the “Company”),
and
each of the persons listed under the caption “Members” on the signature page
hereof, such persons being all of the members of the Company (each a
“Member”
and,
collectively, the “Members”).
RECITALS
WHEREAS,
Key, Key Merger Sub, the Company and the Members have previously entered into
an
Agreement and Plan of Merger (the “Original
Agreement”),
dated
as of March 22, 2007, and now desire to amend and restate the Original Agreement
in its entirety to read as set forth herein;
WHEREAS,
the boards of directors of each of Key, Parent, Key Merger Sub, New Key Merger
Sub and the Company have each declared it to be advisable and in the best
interests of each company and their respective stockholders and owners to
consummate the transactions contemplated hereby on the terms and conditions
set
forth herein; and
WHEREAS,
it is intended that, for United States federal income tax purposes, the Mergers
(as defined below) shall qualify as exchanges described in Section 351 of
the Internal Revenue Code of 1986, as amended, and the regulations promulgated
thereunder (the “Code”),
and
that the Members will not recognize any gain or loss as a result of the Mergers
based upon Section 351 of the Code.
NOW,
THEREFORE, in consideration of the foregoing and the mutual representations,
warranties, covenants and agreements herein contained, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
ARTICLE
I
THE
MERGERS
1.1 The
Key Merger.
(a) At
the
Initial Effective Time (as defined below), New Key Merger Sub will be merged
with and into Key (the “Key
Merger”)
in
accordance with the Delaware
General Corporation Law (“DGCL”),
and
upon the terms set forth in this Agreement, whereupon the separate existence
of
New Key Merger Sub shall cease and Key shall be the surviving entity (the
“Key
Surviving Entity”).
(b) As
soon
as practicable (and, in any event, within two Business Days (as defined below))
after satisfaction or, to the extent permitted hereunder, waiver of all
conditions to the Mergers (as defined below) set forth in Article VI
(excluding
conditions that, by their nature, cannot be satisfied until the
Closing
and will
in fact be satisfied or waived at the Closing), Key shall file a certificate
of
merger with the Delaware Secretary of State and make all other filings or
recordings required by the DGCL in connection with the Key Merger. The Key
Merger shall become effective at the Initial Effective Time. As used herein,
the
term “Initial
Effective Time”
shall
mean the time at which the certificate of merger is filed pursuant to this
Section 1.1(b)(or at any other time indicated therein and mutually agreed to
by
Key and the
Company).
As
used herein, the term “Business
Day”
shall
mean any day on which banks are permitted to be open in New York, New
York.
(c) From
and
after the Initial Effective Time, the Key Surviving Entity shall possess all
the
rights, powers, privileges and franchises and be subject to all of the
obligations, liabilities, restrictions and disabilities of Key and New Key
Merger Sub, all as provided under the DGCL.
1.2 The
Cay Merger.
(a) At
the
Effective Time (as defined below), Key Merger Sub shall be merged with and
into
the
Company
(the
“Cay
Merger”
and,
together with the Key Merger, the “Mergers”)
in
accordance with the Florida Limited Liability Company Act, Chapter 608 (the
“Florida
Act”),
and
upon the terms set forth in this Agreement, whereupon the separate existence
of
Key Merger Sub shall cease and the
Company
shall be
the surviving entity (the “Cay
Surviving Entity”
and,
together with the Key Surviving Entity, the “Surviving
Entities”).
(b) Immediately
following the Initial Effective Time, the
Company
and Key
Merger Sub shall file a certificate of merger with
the
Florida Secretary of State in substantially the form of Exhibit
B
attached
hereto
and make
all other filings or recordings required by Florida law in connection with
the
Cay Merger. The Cay Merger shall become effective at the Effective Time. As
used
herein, the term “Effective
Time”
shall
mean the time one minute following the Initial Effective Time.
(c) From
and
after the Effective Time, the Cay Surviving Entity shall possess all the rights,
powers, privileges and franchises and be subject to all of the obligations,
liabilities, restrictions and disabilities of the
Company
and Key
Merger Sub, all as provided under Florida law.
1.3 Closing.
Unless
this Agreement shall have been terminated and the transactions contemplated
by
this Agreement abandoned pursuant to the provisions of Article VIII, and subject
to the satisfaction or waiver, as the case may be, of the conditions set forth
in Article VI, the closing of the Mergers and other transactions contemplated
by
this Agreement (the “Closing”)
shall
take place on
the
date on which the Initial Effective Time and the Effective Time occur
(the
“Closing
Date”).
The
Closing shall take place at the offices of ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
and
▇▇▇▇▇, P.C. in New York, New York.
2
1.4 Effect
of the Mergers.
At the
Initial Effective Time, the Key Merger shall have the effects set forth in
this
Agreement and in the DGCL. At the Effective Time, the Cay Merger shall have
the
effects set forth in this Agreement and in the Florida Act. Without limiting
the
generality of the foregoing, and subject thereto, at the Initial Effective
Time
all the assets, properties, rights, privileges, immunities, powers and
franchises of Key and New Key Merger Sub shall vest in the Key Surviving Entity
and all debts, liabilities and duties of the Company and Key Merger Sub shall
become the debts, liabilities and duties of the Cay Surviving
Entity.
1.5 Certificate
of Formation; Limited Liability Company Agreement; Certificate of Incorporation;
Bylaws.
(a) From
and
after the Effective Time and without further action on the part of the parties,
the Certificate of Formation of the Company immediately prior to the Effective
Time shall be the Certificate of Formation of the Cay Surviving Entity until
amended in accordance with the terms thereof.
(b) From
and
after the Effective Time, the operating agreement set forth on Exhibit
C
attached
hereto shall be the operating agreement of the Cay Surviving Entity until
amended in accordance with terms thereof.
(c) From
and
after the Initial Effective Time, the certificate of incorporation set forth
on
Exhibit
D
attached
hereto shall be the certificate of incorporation of the Key Surviving Entity,
until thereafter changed or amended as provided therein or by applicable law.
(d) From
and
after the Initial Effective Time, the bylaws of Key shall be the bylaws of
the
Key Surviving Entity.
1.6 Cay
Merger Consideration.
(a) The
aggregate consideration (the “Cay
Merger Consideration”)
to be
paid or reserved for issuance by Parent, Key and the Merger Sub in the Mergers
to the Members shall be (1) 21,666,667 fully paid and non-assessable shares
of
common stock of Parent, par value $0.001 per share (the “Parent
Common Stock”),
and
(2) 5,000,000 shares of Parent Common Stock which shall be deposited in and
subject to the Escrow created and established pursuant to Section 1.13 (such
shares to be deposited in the Escrow shall sometimes be referred to as the
“Escrow
Shares”).
(b) At
the
Effective Time, each Company Membership Interest (as defined below) held by
a
Member immediately prior to the Effective Time shall, by virtue of the Mergers,
and without any action on the part of such Member, be converted automatically
into and become the aggregate of the Cay Merger Consideration and shall be
allocated among the Members as set forth on Schedule
1.6(a)
(which
Schedule shall be amended from time to time to reflect the addition of any
new
Members to the Company and which final Schedule shall be delivered at least
one
week prior to Closing).
3
(c) From
and
after the Effective Time, all membership interests of the Company, (together,
“Company
Membership Interests”)
(other
than any Company Membership Interests to be canceled and retired pursuant to
Section 1.6(e)) shall be deemed canceled and shall cease to exist, and each
holder of a Company Membership Interest shall cease to have any rights with
respect thereto except as set forth herein or under applicable law.
(d) As
soon
as practicable after the Effective Time, Parent shall furnish one or more
certificates representing the prescribed number of shares of Parent Common
Stock
to the Members in accordance with Section 1.12 hereof.
(e) Immediately
prior to the Effective Time, each Company Membership Interest owned by Key,
Parent or any direct or indirect wholly owned Subsidiary (as defined in
Section 2.2(a)) of Key, Parent or the Company, shall be canceled and
extinguished without any conversion thereof or payment therefor.
(f) All
shares of Parent Common Stock issued upon the surrender for exchange of Company
Membership Interests in accordance with the terms of this Article I shall be
deemed to have been issued in full satisfaction of all rights pertaining to
such
Company Membership Interests under this Article I. If, after the Effective
Time,
certificates representing Company Membership Interests are presented to Key,
Parent or Cay Surviving Entity for any reason, they shall be canceled and
exchanged as provided in this Article I.
(g) Parent’s
ownership interest in Key Merger Sub shall be converted automatically into
a
100% membership interest in the Company.
1.7 Key
Merger Consideration; Options and Warrants. At
the
Initial Effective Time, by virtue of the Key Merger and without any action
on
the part of Key, Parent, New Key Merger Sub or any holder of any shares of
Key
Common Stock:
(a) All
shares of Key Common Stock that are held by Key as treasury stock or that are
owned by Key, New Key Merger Sub or any other Subsidiary of Key immediately
prior to the Initial Effective Time shall cease to be outstanding and shall
be
cancelled and retired and shall cease to exist and no consideration shall be
delivered in exchange therefor.
(b) Each
outstanding share of Key Common Stock issued and outstanding immediately prior
to the Initial Effective Time shall be converted into the right to receive
from
Parent one fully paid and nonassessable share of Parent Stock (the “Key
Merger Consideration”).
All
shares of Parent Stock issued pursuant to this Section 1.7(b) shall be duly
authorized and validly issued and free of preemptive rights, with no personal
liability attaching to the ownership thereof. Each option, warrant or other
right to acquire Key Common Stock which is outstanding immediately prior to
the
Effective Time (whether vested or unvested) shall, as of the Initial Effective
Time, cease to represent an option or warrant on, or other right to acquire,
shares of Key Common Stock and shall instead represent the right to purchase
a
number of shares of Parent Stock equal to the number of shares of Key Common
Stock subject to such option, warrant or other right immediately prior to the
Initial Effective Time. The exercise price per share of Key Common Stock subject
to any such option, warrant, units or other right at and after the Initial
Effective Time shall be equal to the exercise price per share of Parent Stock
subject to such option, warrant or other right prior to the Initial Effective
Time.
4
(c) Each
share of New Key Merger Sub common stock issued and outstanding immediately
prior to the Effective Time shall be converted into one share of common stock
of
the Key Surviving Entity.
(d) All
of
the shares of Key Common Stock converted into the right to receive Parent Stock
pursuant to this Section 1.7 shall cease to be outstanding and shall be
cancelled and retired and shall cease to exist and, as of the Initial Effective
Time, the holders of Key Common Stock shall be deemed to have received shares
of
Parent Stock (without the requirement for the surrender of any certificate
previously representing any such shares of Key Common Stock or issuance of
new
certificates representing Parent Stock), with each certificate representing
shares of Key Common Stock prior to the Initial Effective Time being deemed
to
represent automatically an equivalent number of shares of Parent Stock and
with
each share of Key Common Stock represented by book-entry immediately prior
to
the Initial Effective Time being deemed to represent automatically one share
of
Parent Stock.
(e) Immediately
following the Effective Time, shares of the capital stock of Parent owned by
the
Key Surviving Entity shall be cancelled by Parent without payment
therefor.
1.8 Adjustments
to Cay Merger Consideration.
Notwithstanding any other provision of this Agreement, the Cay Merger
Consideration shall be adjusted, at any time and from time to time, to fully
reflect the effect of any stock split, reverse split, stock dividend (including,
without limitation, any dividend or distribution of securities convertible
into
Parent Common Stock), reorganization, recapitalization or other like change
with
respect to Parent Common Stock, occurring prior to the Closing.
1.9 No
Fractional Shares.
No
certificate or scrip representing fractional shares of Parent Common Stock
shall
be issued as part of the Cay Merger Consideration, and such fractional share
interests will not entitle the owner thereof to vote or to any other rights
of a
stockholder of Key or Parent. Notwithstanding any other provision of this
Agreement, each holder of Company Membership Interests who would otherwise
be
entitled to receive a fraction of a share of Parent Common Stock (after taking
into account all Company Membership Interests) shall receive from Parent, in
lieu thereof, the next highest number of whole shares of Parent Common
Stock.
1.10 No
Liability.
Notwithstanding any other provision of this Agreement, none of Key, Parent,
any
Merger Sub or any Surviving Entity shall be liable to a Member for any shares
of
Key Common Stock or Parent Common Stock or any amount of cash properly paid
to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
1.11 Taking
of Necessary Action; Further Action.
If, at
any time and from time to time after the Effective Time, any further action
is
necessary or desirable to carry out the purposes of this Agreement and to vest
in the Cay Surviving Entity full right, title and possession of all assets,
properties, rights, privileges, powers and franchises of the Company and to
vest
in the Key Merger Sub Surviving Entity full right, title and possession of
all
assets, properties, rights, privileges, powers and franchises of Key and of
New
Key Merger Sub, the officers and directors of each Surviving Entity shall be
and
are fully authorized and directed, in the name of and on behalf of the Company
and Key Merger Sub, on the one hand and Key and New Key Merger Sub on the other
hand, to take, or cause to be taken, all such lawful and necessary action as
is
not inconsistent with this Agreement.
5
1.12 Letter
of Transmittal.
As
promptly as practicable before or after the Effective Time, Parent (or its
designee or exchange agent) will send to each Member as set forth on
Schedule
1.6(a)
a letter
of transmittal for use in enabling Parent to issue one or more certificates
representing the prescribed number of shares of Parent Common Stock to which
such Member may be entitled as determined in accordance with the provisions
of
this Agreement. Upon delivery of a duly executed letter of transmittal, such
Member will be entitled to receive the portion of the Cay Merger Consideration
to which such Member may be entitled (as determined in accordance with the
provisions of this Agreement). It is intended that such letter of transmittal
will contain provisions requiring each executing Member thereof to (a)
acknowledge and agree to be bound by Sections 1.6 (Cay Merger Consideration)
of
this Agreement, (b) make representations and warranties with respect to
ownership of the Company Membership Interests owned or held by such Member
at
that time, and (c) waive all appraisal or dissenter’s rights, in each case, in a
form reasonably satisfactory to Key and as a condition precedent to Parent’s
obligation to issue shares of Parent Common Stock to such Member. If any
certificate representing shares of Parent Common Stock are to be issued in
a
name other than that as set forth in Schedule
1.6(a),
it
shall be a condition that the person requesting such shall deliver to Parent
(or
its designee) all documents necessary to evidence and effect such transfer
and
pay to Parent (or its designee) any transfer or other taxes required by reason
of such issuance or establish to the satisfaction of Parent (or its designee)
that such tax has been paid or is not applicable.
1.13 Escrow.
(a) To
provide for the indemnity obligations set forth in Article VII, the Escrow
Shares shall be deposited in escrow (the “Escrow”).
The Escrow Shares shall be subject to the terms and conditions provided
herein and the Escrow Agreement to be entered into at the Closing between
Parent, Key, F. ▇▇▇▇ ▇▇▇▇▇ Irrevocable Trust under Agreement dated August 31,
2004 (the “▇▇▇▇▇ Trust”), ▇▇▇▇▇ ▇▇▇▇▇▇▇ and Continental Stock Transfer and Trust
Company (“Continental”)
(or
another escrow agent acceptable to the parties), as Escrow Agent, in
substantially the form annexed hereto as Exhibit
E
(the
“Escrow
Agreement”).
(b) On
the
date that is twelve (12) months and one day subsequent to the Closing Date,
only
2,500,000 Escrow Shares, shall be retained in Escrow and the excess Escrow
Shares shall be released from the Escrow and the Escrow Agent shall deliver
such
excess Escrow Shares to the Members, pro rata among them in accordance with
the
distribution of the Cay Merger Consideration as set forth on Schedule
1.6(a).
On the
date that is eighteen (18) months subsequent to the Closing Date, pursuant
to
Article VII, the indemnity obligations of the Members shall terminate under
this
Agreement and any shares remaining in the Escrow Account shall be released
from
the Escrow and the Escrow Agent shall deliver the Escrow Shares to the Members,
pro rata among them in accordance with the distribution of the Merger
Consideration as set forth on Schedule
1.6(a).
Any
Escrow Shares that are deposited in Escrow and are used to satisfy an
indemnification obligation pursuant to Article VII shall be removed from the
Escrow, shall cease to be Escrowed Shares and shall be returned to Key, at
such
time such shares shall be retired by Key. Notwithstanding anything set forth
in
this Section 1.13(d), the indemnification provisions of Article VII, and
specifically Section 7.4, and the Escrow Agreement shall control any releases
of
Escrow Shares from Escrow to satisfy the Article VII indemnification obligations
and the general operation and maintenance of such account.
6
1.14 Rule
145.
All
shares of Parent Common Stock issued pursuant to this Agreement to “affiliates”
of the Company listed on Schedule
1.14
will be
subject to
certain resale restrictions under Rule 145 promulgated under the Securities
Act
of 1933, as amended (the “Securities
Act”)
and
all certificates representing such shares shall bear an appropriate restrictive
legend. At the Closing, Parent and
the
Members shall execute and deliver a Registration Rights Agreement in the form
annexed hereto as Exhibit
F
with
respect to registration of the shares of Parent
Common
Stock under the Securities Act (the “Registration
Rights Agreement”).
1.15 Member
Matters.
(a) Each
Member, for itself only, represents and warrants as follows: (i) all Parent
Common Stock to be acquired by such Member pursuant to this Agreement will
be
acquired for his, her or its account and not with a view towards distribution
thereof other than, with respect to Members that are entities, transfers to
its
stockholders, partners or members; (ii) it understands that he, she or it must
bear the economic risk of the investment in the Parent Common Stock, which
cannot be sold by he, she or it unless it is registered under the Securities
Act, or an exemption therefrom is available thereunder; (iii) he, she or it
has
had both the opportunity to ask questions and receive answers from the officers
and directors of Key and all persons acting on Key’s behalf concerning the
business and operations of Parent and Key and to obtain any additional
information to the extent Key possesses or may possess such information or
can
acquire it without unreasonable effort or expense necessary to verify the
accuracy of such information; and (iv) he, she or it has had access to the
Key
SEC Reports filed prior to the date of this Agreement. Each Member acknowledges,
as to himself, herself or itself only, that (v) he, she or it is either (A)
an
“accredited investor” as such term is defined in Rule 501(a) promulgated under
the Securities Act, or (B) a person possessing sufficient knowledge and
experience in financial and business matters to enable it to evaluate the merits
and risks of an investment in Parent and Key; and (vi) he, she or it understands
that the certificates representing the Parent Common Stock to be received by
he,
she or it may bear legends to the effect that the Parent Common Stock may not
be
transferred except upon compliance with (C) the registration requirements of
the
Securities Act (or an exemption therefrom), and (D) the provisions of this
Agreement. Each Member that is an entity, for itself, represents, warrants
and
acknowledges, with respect to each holder of its equity interests, to the same
effect as the foregoing provisions of this Section 1.15(a).
(b) Each
Member, for himself, herself or itself, represents and warrants that the
execution and delivery of this Agreement by such Member does not, and the
performance of his, her or its obligations hereunder will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any court, administrative agency, commission, governmental or regulatory
authority, domestic or foreign (a “Governmental
Entity”),
except (i) for applicable requirements, if any, of the Securities Act, the
Securities Exchange Act of 1934, as amended (“Exchange
Act”),
state
securities laws (“Blue
Sky Laws”),
and
the rules and regulations thereunder, and (ii) where
the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on such Member or
the
Company or, after the Closing, Parent,
or
prevent consummation of the Mergers
or
otherwise prevent the parties hereto from performing their obligations under
this Agreement.
7
1.16 Committee
for Purposes of Agreement.
Prior
to the Closing, the board
of
directors
of
Parent shall appoint a committee consisting of one of its then members to act
on
behalf of Parent to take all necessary actions and make all decisions pursuant
to the Escrow Agreement regarding Parent’s right to indemnification pursuant to
Article VII hereof. In the event of a vacancy in such committee, the
board
of
directors
of
Parent shall appoint as a successor a Person who was a director of Key prior
to
the Closing Date or some other Person who would qualify as an “independent”
director of Parent and who has not had any relationship with the Company prior
to the Closing. Such committee is intended to be the “Committee”
referred to in Article VII hereof and the Escrow Agreement.
1.17 Earn-Out
Shares
(a) As
promptly as practicable after the end of the twelve (12) month period commencing
on January 1, 2008 and ending on December 31, 2008 (the “2008
Performance Period”),
the
twelve (12) month period commencing on January 1, 2009 and ending on December
31, 2009 (the “2009
Performance Period”)
and
the twelve (12) month period commencing on January 1, 2010 and ending on
December 31, 2010 (the “2010
Performance Period”)
(the
2008 Performance Period, 2009 Performance Period and 2010 Performance Period
each, a “Performance
Period”)
but in
no event later than 90 days thereafter, Parent will deliver or cause to be
delivered to the ▇▇▇▇▇ Trust and ▇▇▇▇▇ ▇▇▇▇▇▇▇ a statement for the
applicable Performance Period (the “Net
Income Statement”)
setting forth the calculation of the net income (after taxes) of the Company
for such Performance Period. The Net Income Statement shall
be prepared using the audited financial statements of Parent and shall
be final and binding on the parties. In order to facilitate the calculation
of any Earn-Out Shares (as defined below) that may be delivered to the
▇▇▇▇▇ Trust and ▇▇▇▇▇ ▇▇▇▇▇▇▇, if any, pursuant to this Section
1.17, Parent shall account for the Company and its Subsidiaries separately
from
other assets held and businesses conducted by Parent and its
Affiliates during the applicable
Performance Period.
(b) Earn-Out
Shares, if any, shall be delivered to the ▇▇▇▇▇ Trust and ▇▇▇▇▇ ▇▇▇▇▇▇▇ (pro
rata among them in accordance with the distribution of the Cay Merger
Consideration as set forth on Schedule
1.6(a)) within
fifteen (15) Business Days following the delivery of the applicable Net Income
Statement, as provided in Schedule
1.17
hereto. “Earn-Out
Shares”
shall
be calculated as set forth on Schedule 1.17 hereto.
(c) The
Net
Income targets set forth on Schedule
1.17 shall
be appropriately adjusted pro rata to reflect any stock issuances on a
time-weighted basis (for example, an issuance of shares of Parent Common
Stock (excluding the Escrow Shares and shares of Parent Common Stock issued
upon exercise of options and warrants) on January 1, 2008 representing 5% of
the
issued and outstanding shares of capital stock of Parent on a fully-diluted
basis shall increase targeted Net Income by 5% and an issuance of shares of
Parent Common Stock (excluding the Escrow Shares and shares of Parent
Common Stock issued upon exercise of options and warrants) on July 1, 2008
representing 5% of the issued and outstanding shares of capital stock of Parent
on a fully-diluted basis shall increase targeted Net Income by 2.5%). Similarly,
the number of Escrow Shares that are returned to Parent and the target
stock prices used shall be appropriately adjusted for any stock splits, stock
dividends, reorganizations and similar events.
8
1.18 Outstanding
Company Derivative Securities.
The
Company shall, and shall cause its Subsidiaries to, arrange that the holders
of
all outstanding options, warrants and other derivative securities of the Company
or any Subsidiary exercise such securities prior to the Effective Time. Such
exercise may be made contingent upon the occurrence of the Closing and no Person
shall have any right to acquire any ownership or other equity interest in the
Company or any Subsidiary (other than Parent at Closing).
1.19 Transaction
Structure.
The
parties may, with the approval of their respective boards of directors, at
any
time prior to October 1, change the method of effecting the combination of
Parent and Cay contemplated hereby (including, without limitation, the
provisions of this Article I). This Agreement and any related documents will
be
appropriately amended in order to reflect any such revised transaction.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Except
as
set forth in the disclosure schedule provided by the Company to Parent and
Key
on the date hereof, which (without limiting Parent and Key’s rights under
Section 6.3(f) hereof) may be supplemented from time to time after the date
hereof should any fact or condition require a change thereto (the “Company
Disclosure Schedule”),
the
Company represents and warrants to Parent and Key that the statements contained
in this Article II are true, complete and correct as of the date hereof and
as
of the Closing Date unless such representation or warranty is limited as to
a
specified date. Unless otherwise noted, all references to the Company and its
Subsidiaries in this Article II shall mean the Company on an as reorganized
basis as such reorganization is set forth on Schedule
2.2(a)
hereto.
The Company Disclosure Schedule shall be arranged in paragraphs corresponding
to
the numbered and lettered paragraphs contained in this Article II. As used
in
this Agreement, a “Company
Material Adverse Effect”
(or
a
Material Adverse Effect relating to the Company) shall
mean
any
change, event or effect that is materially adverse to the business, assets
(including, without limitation, intangible assets), financial condition, results
of operations of the Company or any of its Subsidiaries, taken as a whole.
A
“Project
Material Adverse Effect”
shall
mean any change, event or effect that is materially adverse to the business,
assets (including without limitation intangible assets) financial condition
or
results of operations of any individual Material Project. Notwithstanding the
foregoing, “Company
Material Adverse Effect”
and
“Project
Material Adverse Effect”
shall
not include events caused by general economic conditions (but shall include
economic conditions applicable solely or principally to the hospitality or
resort industries or to locations in which the Company and its Subsidiaries
operate). The following projects shall constitute “Material
Projects”:
Orlando, Sandpiper, Bayshore, Crested Butte, Boca Chica, Clearwater, Marathon,
Las Vegas, Sarasota, Tavernier and Islemorada. “Optioned
Property Provider”
shall
mean the entities set forth on Schedule
2.15(c)
attached
hereto. The following projects shall constitute the “Optioned
Property Projects”:
(a)
Bayshore, Clearwater, Orlando, Islemorada, Marathon, Sombrero, Sarasota and
Tavernier and (b) if the Closing is consummated for an Optioned Property
Provider, the owner of an Optioned Property Provider or any affiliate thereof
to
acquire any of the following properties then: Sandpiper and/or Crested Butte.
If
an exception is adequately disclosed in any one section of the Company
Disclosure Schedules, it should be deemed disclosed for purposes of each other
section of the Company Disclosure Schedules where it is reasonably apparent
that
such exception is applicable.
9
2.1 Organization
and Qualification.
(a) The
Company is a limited liability company duly organized, validly existing and
in
good standing under the laws of the State of Florida, and is qualified to do
business in Florida and all other jurisdictions where the character of the
properties and other assets owned, leased or operated by it, or the nature
of
its activities, makes such qualification or licensing necessary, except where
the failure to be so qualified, licensed or in good standing, individually
or in
the aggregate, has not had and would not be expected to have a Company Material
Adverse Effect. The Company is in possession of all franchises, grants,
authorizations, licenses, permits, easements, consents, certificates, approvals
and orders (“Approvals”)
necessary to own, lease and operate the properties it purports to own, operate
or lease and to carry on its business as it is now being conducted, except
where
the failure to have such Approvals could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company. The
Company has delivered to Parent true, complete and correct copies of its
Certificate of Formation and operating agreement of the Company (the
“Operating
Agreement”),
each
as amended to date. The Company is not in default under or in violation of
any
provision of its Certificate of Formation or Operating Agreement.
(b) The
minute books of the Company contain true, complete and accurate records of
all
meetings and consents in lieu of meetings of its board
of
directors
or
Managers, if applicable (and any committees thereof), similar governing bodies
and Members (“Corporate
Records”)
since
January 1, 2004. Copies of such Corporate Records of the Company have been
heretofore made available to Parent’s counsel.
(c) The
transfer and ownership records of the Company contain true, complete and
accurate records of the securities ownership as of the date of such records
and
the transfers involving the Company Membership Interests and other securities
of
the Company since January 1, 2004. Copies of such records of the Company have
been heretofore made available to Parent or Parent’s counsel.
2.2 Subsidiaries.
(a) Schedule
2.2(a)
sets
forth a complete and correct list of each Subsidiary of the Company and of
all
jurisdictions in which the Company or any such Subsidiary is qualified or
licensed to do business. Attached to Schedule
2.2(a)
is an
organizational chart of the Company and its Subsidiaries. For purposes of this
Agreement, the term “Subsidiary”
shall
mean,
with
respect to any Person, any corporation or other organization, whether
incorporated or unincorporated, of which: (i) such Person (or any other
Subsidiary of such Person) is a general partner (excluding partnerships, the
general partnerships of which held by such Person or Subsidiary of such Person
do not have a majority of the voting interest of such partnership); or (ii)
at
least a majority of the securities or other equity interests having by their
terms ordinary voting power to elect a majority of the board
of
directors
or
others performing similar functions with respect to such corporation or other
organization, is directly or indirectly owned or controlled by such Person
or by
any one or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries. Except for the Subsidiaries set forth on Schedule
2.2(a),
the
Company does not own, directly or indirectly, any ownership, equity, profits
or
voting interest in any Person or have any agreement or commitment to purchase
any such interest, and has not agreed and is not obligated to make nor is bound
by any written, oral or other agreement, contract, subcontract, lease, binding
understanding, instrument, note, option, warranty, purchase order, license,
sublicense, insurance policy, benefit plan, commitment or undertaking of any
nature, as of the date hereof or as may hereafter be in effect under which
it
may become obligated to make, any future investment in or capital contribution
to any other entity.
10
(b) Each
Subsidiary that is a corporation is duly incorporated, validly existing and
in
good standing under the laws of its state of incorporation
(as listed on Schedule
2.2(a))
and has
the requisite corporate power and authority to own, lease and operate its assets
and properties and to carry on its business as it is now being or currently
planned by the Company to be conducted. Each Subsidiary that is a limited
liability company is duly organized or formed, validly existing and in good
standing under the laws of its state of organization or formation (as listed
on
Schedule
2.2(a))
and has
the requisite power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted by the
Company. Each Subsidiary is in possession of all Approvals necessary to own,
lease and operate the properties it purports to own, operate or lease and to
carry on its business as it is now being or currently planned by the Company
to
be conducted, except where the failure to have such Approvals could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company or such Subsidiary. Complete and correct copies
of
the certificate of incorporation and by-laws (or other comparable governing
instruments with different names) (collectively referred to herein as
“Charter
Documents”)
of
each Subsidiary, as amended and currently in effect, have been heretofore
delivered or made available to Parent
or
Parent’s
counsel. No Subsidiary is in violation of any of the provisions of its Charter
Documents.
(c) Each
Subsidiary is duly qualified or licensed to do business as a foreign corporation
or foreign limited liability company 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 activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or licensed and
in
good standing that could not, individually or in the aggregate, reasonably
be
expected to have a Material Adverse Effect on the Company or such Subsidiary.
Each jurisdiction in which each Subsidiary is so qualified or licensed is listed
in Schedule
2.2(a).
(d) The
minute books of each Subsidiary contain true, complete and accurate records
of
all meetings and consents in lieu of meetings of its board
of
directors
(and any
committees thereof), similar governing bodies and stockholders since January
1,
2004. Copies of the Corporate Records of each Subsidiary have been heretofore
made available to Parent or Parent’s counsel.
2.3 Capitalization.
(a) All
of the Company Membership Interests held by the Members of the Company are
as
reflected on Schedule
1.6(a).
11
(b) As
of the
date hereof, there are no shares of voting or non-voting capital stock, equity
interests, percentage interests or other securities of the Company authorized,
issued, reserved for issuance or otherwise outstanding. Schedule
1.6(a)
sets
forth a true, complete and correct list of all holders of Company Membership
Interests indicating the percentage of Company Membership Interests held by
each
of them. The Company has entered into an agreement with an Optioned Property
Provider (the “Optioned
Property Agreement”).
A
true, correct and complete copy of the Optioned Property Agreement has been
provided to Parent. The Company may amend the Optioned Property Agreement
provided that the amended agreement preserves the economic substance of the
original agreement prior to the amendment.
(c) Schedule
1.6(a)
also
sets forth a true, complete and correct list of the holders of all Company
Options and Company Warrants, including: (i) the number and class of Company
Membership Interests subject to each such Company Option or Company Warrant;
(ii) the date of grant; (iii) the exercise price; (iv) the date of grant, the
vesting schedule, as applicable, and expiration date; and (v) any other material
terms, including, without limitation, any terms regarding the acceleration
of
vesting. At Closing, no such derivative securities will be
outstanding.
(d) All
outstanding Company Membership Interests are, and all membership interests
which
may be issued pursuant to the Company Options and Company Warrants, will be,
when issued against payment therefore in accordance with the terms thereof,
duly
authorized, validly issued, fully paid and non-assessable, and not subject
to,
or issued in violation of, any kind of preemptive, subscription or of similar
rights, and were or will be issued in compliance in all material respects with
all applicable federal and state securities laws.
(e) There
are
no outstanding obligations of the Company to repurchase, redeem or otherwise
acquire any shares of capital stock (or options to acquire any such shares),
membership interests, percentage interests or other security or equity interests
of the Company or to cause the Company or its Subsidiaries to file a
registration statement under the Securities Act, or which otherwise relate
to
the registration of any securities of the Company or its
Subsidiaries.
(f) Except
as
disclosed in Schedule
1.6(a),
there
are no bonds, debentures, notes or other indebtedness of the Company having
the
right to vote (or convertible into securities having the right to vote) on
any
matters on which the Company’s members may vote. Except as described in
subsection (c) above, there are no outstanding securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of any
kind
(contingent or otherwise) to which the Company is a party or bound obligating
the Company to issue, deliver or sell, or cause to be issued, delivered or
sold,
membership interests, percentage interests or other voting securities of the
Company or obligating the Company to issue, grant, extend or enter into any
agreement to issue, grant or extend any security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. The Company is not subject
to
any obligation or requirement to provide funds for or to make any investment
(in
the form of a loan or capital contribution) to or in any Person.
(g) There
are
no voting trusts, proxies or other agreements, arrangements, commitments or
understandings of any character to which the Company or its Subsidiaries or,
to
the Knowledge of the Company, any of the Company’s members, is a party or by
which any of them is bound with respect to the issuance, holding, acquisition,
voting or disposition of any shares of capital stock, membership interests,
percentage interests or other security or equity interests of the
Company.
12
(h) The
authorized and outstanding capital stock or membership interests of each
Subsidiary are set forth in Schedule
2.2(a)
hereto.
Except as set forth on Schedule
2.2(a),
all of
the outstanding shares or membership interests of the Company's wholly owned,
direct or indirect, Subsidiaries (and all of the shares or membership interests
of non-wholly owned Subsidiaries owned, directly or indirectly, by the Company)
are owned, directly or indirectly, by the Company, free and clear of any Liens,
charges, pledges, security interests, mortgages, claims, encumbrances, options
or rights of first refusal. All of the outstanding shares of capital stock
or
membership interests of each of such Subsidiaries owned by the Company have
been
duly authorized and validly issued and are fully paid, non-assessable and free
of preemptive or similar rights. Except as contemplated by the Mergers, there
are no warrants, options, agreements, call rights, conversion rights, exchange
rights, preemptive rights or other rights or commitments or understandings
relating to the issuance, sale, delivery, pledge, transfer, redemption or other
disposition by the Company or its Subsidiaries (including any right of
conversion or exchange under any outstanding security or other instrument)
of
the capital stock or membership interests of any of the Company's Subsidiaries.
None of the Subsidiaries owns any stock or membership interests of the
Company.
2.4 Authority
Relative to this Agreement.
The
Company has all necessary corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby (including the Mergers). The execution and
delivery of this Agreement and the consummation by the Company of the
transactions contemplated hereby (including the Mergers) have been duly and
validly authorized by all necessary action on the part of the Company (including
the approval by its Members, subject in all cases to the satisfaction of the
terms and conditions of this Agreement, including the conditions set forth
in
Article VI), and no other corporate proceedings on the part of the Company
are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby pursuant to the Florida Act and the terms and conditions
of
this Agreement. The Mergers and the adoption of this Agreement have been
approved by the affirmative vote of all of the holders of the Company Membership
Interests in accordance with the Florida Act and the Operating Agreement (the
“Requisite
Member Approval”).
This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery thereof by the other
parties hereto, constitutes the legal and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as may
be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors’ rights generally and by general
principles of equity.
2.5 No
Conflict; Required Filings and Consents.
(a) The
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company shall not, (i) conflict with or
violate the Company’s Certificate of Formation or Operating Agreement, (ii)
conflict with or violate any Legal Requirements (as defined in Section 10.2(a)),
(iii) result in any breach of, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or materially
impair the Company’s rights or alter the rights or obligations of any third
party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company pursuant to,
any
Material Company Contracts or (iv) result in the triggering, acceleration or
increase of any payment to any Person pursuant to any Company Contract,
including any “change in control” or similar provision of any Company Contract,
except, with respect to clauses (ii), (iii) or (iv), for any such conflicts,
violations, breaches, defaults, triggerings, accelerations, increases or other
occurrences that would not, individually and in the aggregate, have a Material
Adverse Effect on the Company.
13
(b) The
execution and delivery of this Agreement by the Company does not, and the
performance of its obligations hereunder will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity, except: (i) as set forth in this Agreement, (ii) for the
filing of any notifications required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the “HSR
Act”)
and
the expiration of the required waiting period thereunder, and (iii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company or,
after the Closing, Parent, or prevent consummation of the Mergers or otherwise
prevent the parties hereto from performing their obligations under this
Agreement.
2.6 Compliance
with Laws.
To the
Knowledge of the Company, the Company and its Subsidiaries are in compliance
in
all respects with all Legal Requirements, except for instances of possible
noncompliance that individually or in the aggregate would not reasonably be
expected to have a Company Material Adverse Effect or a Project Material Adverse
Effect. No written notice, charge, claim, action or assertion has been received
by the Company or any of its Subsidiaries (and the Company has no Knowledge
of
any such written notice delivered to any Person) and, to the Company's
Knowledge, no written notice, charge, claim, action has been filed, commenced
or
threatened against the Company or any of its Subsidiaries or any portion of
the
Owned Real Property or any of the Optioned Property Projects alleging any
violation of any Legal Requirements, except for instances of possible
noncompliance that individually or in the aggregate would not reasonably be
expected to have a Company Material Adverse Effect or a Project Material Adverse
Effect. The parties hereto acknowledge that the Company is or may be in the
process of renovating various Owned Real Property and Optioned Property Projects
which will require compliance with respect to certain Legal Requirements and
the
Company and/or the applicable Subsidiary agree to use commercially reasonable
best efforts from and after the date hereof to be in compliance with such Legal
Requirements, it being agreed by Company and any such Subsidiary that any
possible noncompliance with respect to such Legal Requirements as of the Closing
shall not individually or in the aggregate be reasonably expected to have a
Company Material Adverse Effect or a Project Material Adverse
Effect.
2.7 Material
Permits.
(a) To
the
Knowledge of the Company, the Company and its Subsidiaries as the case may
be,
have all material
federal, state, local and foreign governmental licenses, permits, franchises,
approvals and authorizations (the “Material
Permits”)
necessary for the Company, or the Subsidiaries as the case may be, to operate
its business as presently conducted as of the date of this Agreement and as
presently planned to be conducted except for
Material Permits that individually or in the aggregate would not reasonably
be
expected to have a Company Material Adverse Effect or a Project Material Adverse
Effect.
The
parties hereto acknowledge that the Company is or may be in the process of
renovating various Owned Real Property which will require obtaining and comply
with certain Material Permits and the Company and/or the applicable Subsidiary
agree to use commercially reasonable best efforts from and after the date hereof
to obtain and complying with such Material Permits as and when required by
such
Legal Requirements, it being agreed by Company and any such Subsidiary that
any
failure to obtain any such Material Permits as of the Closing shall not
individually or in the aggregate be reasonably expected to have a Company
Material Adverse Effect or a Project Material Adverse Effect.
14
(b) To
the
Knowledge of the Company, neither the Company nor the Subsidiaries have received
any written notice from any governmental agency that they are not in compliance
in all material respects with the terms and conditions of the Material
Permits.
(c) Each
Material Permit is in full force and effect and neither the Company nor any
Subsidiary have received written notification of any action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim that
is
pending or, to the Knowledge of the Company, threatened, which seeks to revoke
or limit any Material Permit.
(d) To
the
Knowledge of the Company, the rights and benefits of each Material Permit will
be available to the Company and the Subsidiaries immediately after the Closing
on terms substantially identical to those enjoyed by the Company and the
Subsidiaries immediately prior to the Closing.
2.8 Financial
Statements.
(a) The
Company has provided to Parent a correct and complete copy of the unaudited
combined financial statements (including any related notes thereto) of the
Company and its Subsidiaries for the fiscal year ended December 31, 2006 (the
“Unaudited
Financial Statements”)
and
audited consolidated financial statements (including any related notes thereto)
of the Company and its Subsidiaries for the fiscal years ended December 31,
2005 and December 31, 2004 (the “Audited
Financial Statements”).
The
Audited Financial Statements have been prepared in accordance with generally
accepted accounting principles of the United States (“U.S.
GAAP”)
applied on a consistent basis throughout the periods involved (except as may
be
indicated in the notes thereto), and each will fairly present in all material
respects the financial position of the Company and its Subsidiaries at the
respective dates thereof and the results of their respective operations and
cash
flows for the periods indicated. The Unaudited Financial Statements comply
as to
form in all material respects, and were prepared in accordance with, U.S. GAAP
applied on a consistent basis throughout the periods involved (except as may
be
indicated in the notes thereto), and fairly present in all material respects
the
financial position of the Company and its Subsidiaries at the date thereof
and
the results of their respective operations and cash flows for the period
indicated, except that such statements do not contain notes and are subject
to
normal adjustments that are not expected to have a Material Adverse Effect
on
the Company.
(b) Since
January 1, 2004, the books of account, minute books, stock certificate books
and
stock transfer ledgers and other similar books and records
of the Company and its Subsidiaries have been maintained in accordance with
good
business practice, are complete and correct in all material respects and there
have been no material transactions that are required to be set forth therein
and
which are not so set forth.
15
(c) Except
as
otherwise noted in the Audited Financial Statements or the Unaudited Financial
Statements, the accounts and notes receivable of the Company and its
Subsidiaries reflected on the balance sheets included in the Audited Financial
Statements and the Unaudited Financial Statements (i) arose from bona fide
transactions in the ordinary course of business and are payable on ordinary
trade terms, (ii) are legal, valid and binding obligations of the respective
debtors enforceable in accordance with their terms, except as such may be
limited by bankruptcy, insolvency, reorganization, or other similar laws
affecting creditors’ rights generally, and by general equitable principles,
(iii) are not subject to any valid set-off or counterclaim except to the extent
set forth in such balance sheet contained therein, and (iv) are not the subject
of any actions or proceedings brought by or on behalf of the Company or its
Subsidiaries.
2.9 No
Undisclosed Liabilities.
To the
Knowledge of the Company, neither the Company nor any of its Subsidiaries has
any liabilities (absolute, accrued, contingent or otherwise) of a nature
required to be disclosed on a balance sheet or in the related notes to the
Unaudited Financial Statements which are, individually or in the aggregate,
material to the business, results of operations or financial condition of the
Company, except: (i) liabilities provided for in or otherwise disclosed in
the
balance sheet included in the Unaudited Financial Statements, and (ii) such
liabilities arising in the ordinary course of business and consistent with
past
practice since December 31, 2006.
2.10 Absence
of Certain Changes or Events.
Except
as set forth on Schedule
2.10 or
otherwise set forth in this Agreement, since December 31, 2006, the Company
and
its Subsidiaries have conducted their respective businesses only in the ordinary
course of business consistent with past practice, and there has not been: (i)
any action, event or occurrence which has had, or to the Knowledge of the
Company could reasonably be expected to result in, a Company Material Adverse
Effect; or (ii) any action, event or occurrence which has had a loss or
liability to the Company or any of its Subsidiaries in excess of $250,000 or
where all such matters aggregate more than $1,000,000; or (iii) any other
action, event or occurrence that would have required the consent of Parent
pursuant to Section 4.1 had such action, event or occurrence taken place after
the execution and delivery of this Agreement.
2.11 Litigation.
There
are no claims, suits, actions or proceedings pending or, to the Knowledge of
the
Company, threatened against the Company or any of its Subsidiaries, before
any
court, governmental department, commission, agency, instrumentality or
authority, or any arbitrator that seeks to restrain or enjoin the consummation
of the transactions contemplated by this Agreement or which could reasonably
be
expected, either singularly or in the aggregate with all such claims, actions
or
proceedings, to have a Material Adverse Effect on the Company, have a Project
Material Adverse Effect or have a Material Adverse Effect on the ability of
the
parties hereto to consummate the Mergers.
2.12 Employee
Benefit Plans and Compensation.
(a) Definitions.
With the exception of the definition of “Affiliate” set forth in this Section
2.12(a) below (which definition shall apply only to this Section 2.12(a)),
for
purposes of this Agreement, the following terms shall have the following
respective meanings:
16
“Affiliate”
shall
mean any other person or entity under common control with the Company within
the
meaning of Section 414(b), (c), (m) or (o) of the Code and the regulations
issued thereunder.
“Company
Employee Plan”
shall
mean any plan, program, policy, practice, contract, agreement or other
arrangement providing for compensation, severance, termination pay, deferred
compensation, performance awards, stock or stock-related awards, fringe benefits
or other employee benefits or remuneration of any kind, whether written,
unwritten or otherwise, funded or unfunded, including without limitation, each
“employee benefit plan,” within the meaning of Section 3(3) of ERISA which is or
has been maintained, contributed to, or required to be contributed to, by the
Company or any Affiliate for the benefit of any Employee, or with respect to
which the Company or any Affiliate has or may have any liability or obligation
and any International Employee Plan.
“COBRA”
shall
mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended.
“DOL”
shall
mean the United States Department of Labor.
“Employee”
shall
mean any current, former or rehired employee, consultant, officer or director
of
the Company or any Affiliate.
“Employee
Agreement”
shall
mean each employment, consulting or similar agreement, each agreement providing
for severance, relocation, repatriation, expatriation or similar agreement
(including, without limitation, any offer letter) between the Company or any
Affiliate and any Employee.
“ERISA”
shall
mean the Employee Retirement Income Security Act of 1974, as
amended.
“FMLA”
shall
mean the Family Medical Leave Act of 1993, as amended.
“HIPAA”
shall
mean the Health Insurance Portability and Accountability Act of 1996, as
amended.
“International
Employee Plan”
shall
mean each Company Employee Plan or Employee Agreement that has been adopted
or
maintained by the Company or any Affiliate, whether formally or informally
or
with respect to which the Company or any Affiliate will or may have any
liability with respect to Employees who perform services outside the United
States.
“IRS”
shall
mean the United States Internal Revenue Service.
17
“Pension
Plan”
shall
mean each Company Employee Plan that is an “employee pension benefit plan,”
within the meaning of Section 3(2) of ERISA.
(b) Schedule
2.12(b)
of the
Company Disclosure Schedules sets forth a complete and accurate list of each
Company Employee Plan and Employee Agreement. The Company has not made any
plan
or commitment to establish any new Company Employee Plan or Employee Agreement,
to modify any Company Employee Plan or Employee Agreement (except to the extent
required by law or to conform any such Company Employee Plan or Employee
Agreement to the requirements of any applicable law, or as required by this
Agreement), or to enter into any Company Employee Plan or Employee Agreement,
nor does it have any intention or commitment to do any of the foregoing. The
Company has previously made available to Parent a true and complete table
setting forth the name, position and salary of each employee of the
Company.
(c) Documents.
The
Company has provided to Parent: (i) correct and complete copies of all documents
embodying each Company Employee Plan and each Employee Agreement including,
without limitation, all amendments thereto and written interpretations thereof
and all related trust documents; (ii) the three (3) most recent annual reports
(Form Series 5500 and all schedules and financial statements attached thereto),
if any, filed pursuant to ERISA or the Code in connection with each Company
Employee Plan; (iii) if the Company Employee Plan is funded, the most recent
annual and periodic accounting of Company Employee Plan assets; (iv) the most
recent summary plan description together with the summary(ies) of material
modifications thereto, if any, required under ERISA with respect to each Company
Employee Plan; (v) all material written agreements and contracts relating to
each Company Employee Plan, including, without limitation, administrative
service agreements and group insurance contracts; (vi) all communications from
the Company within the prior three (3) years material to any Employee or
Employees relating to any Company Employee Plan and any proposed Company
Employee Plan, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments
or
vesting schedules or other events which would result in any liability to the
Company; (vii) all correspondence to or from any governmental agency relating
to
any Company Employee Plan within the prior three (3) years; (viii) all material
COBRA forms and related notices; (ix) all policies pertaining to fiduciary
liability insurance covering the fiduciaries for each Company Employee Plan;
(x)
all discrimination tests for each Company Employee Plan for the three (3) most
recent plan years; and (xi) the most recent IRS determination or opinion letter
issued with respect to each Company Employee Plan.
(d) Employee
Plan Compliance.
The
Company has performed all obligations required to be performed by it under,
is
not in default or violation of, and has no Knowledge of any default or violation
by any other party to, any Company Employee Plan, and each Company Employee
Plan
has been established and maintained in accordance with its material terms and
in
compliance, in all material respects, with all applicable laws, statutes,
orders, rules and regulations, including but not limited to ERISA or the Code.
Any Company Employee Plan intended to be qualified under Section 401(a) of
the
Code and any trust intended to qualify under Section 501(a) of the Code has
obtained a favorable determination letter (or opinion letter, if applicable)
as
to its qualified status under the Code or is entitled to rely on a prototype
plan sponsor’s determination letter pursuant to IRS pronouncements. No
“prohibited transaction,” within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, and not otherwise exempt under Section 408 of
ERISA, has occurred with respect to any Company Employee Plan. There are no
actions, suits or claims pending which have been served on the Company or,
to
the Knowledge of the Company, otherwise pending or threatened or reasonably
anticipated (other than routine claims for benefits) against any Company
Employee Plan or against the assets of any Company Employee Plan. Each Company
Employee Plan can be amended, terminated or otherwise discontinued after the
Effective Time in accordance with its terms, without liability to Key, Parent,
the Company or any Affiliate (other than accrued benefits and ordinary
administration expenses). There are no audits, inquiries or proceedings pending
or, to the Knowledge of the Company or any Affiliates, threatened by the IRS,
DOL, or any other Governmental Entity with respect to any Company Employee
Plan.
Neither the Company nor any Affiliate is subject to any penalty or tax with
respect to any Company Employee Plan under Section 402(i) of ERISA or Sections
4975 through 4980 of the Code. The Company has made all contributions and other
payments required by and due under the terms of each Company Employee
Plan.
18
(e) No
Pension Plan.
Neither
the Company nor any Affiliate has ever maintained, established, sponsored,
participated in, or contributed to, any Pension Plan that is subject to Title
IV
of ERISA or Section 412 of the Code.
(f) No
Self-Insured Plan.
Neither
the Company nor any Affiliate has ever maintained, established sponsored,
participated in or contributed to any self-insured plan that provides
healthcare, life, disability or other welfare benefits to employees (including,
without limitation, any such plan pursuant to which a stop-loss policy or
contract applies).
(g) Collectively
Bargained, Multiemployer and Multiple-Employer Plan.
At no
time has the Company or any Affiliate contributed to or been obligated to
contribute to any multiemployer plan, as defined in Section 414(f) of the Code
and Section 3(37) of ERISA. Neither the Company nor any Affiliate has at any
time ever maintained, established, sponsored, participated in or contributed
to
any multiple employer plan or to any plan described in Section 413 of the
Code.
(h) No
Post-Employment Obligations.
No
Company Employee Plan or Employment Arrangement provides, or reflects or
represents any liability to provide, retiree life insurance, retiree health
or
other retiree employee welfare benefits to any person for any reason, except
as
may be required by COBRA or other applicable statute, and the Company has not
represented, promised or contracted (whether in oral or written form) to any
Employee (either individually or to Employees as a group) or any other person
that such Employee(s) or other person would be provided with retiree life
insurance, retiree health or other retiree employee welfare benefits, except
to
the extent required by statute.
(i) COBRA;
FMLA; HIPAA.
The
Company and each Affiliate has, prior to the Effective Time, complied, in all
material respects, with COBRA, FMLA, HIPAA, the Women’s Health and Cancer Rights
Act of 1998, the Newborns’ and Mothers’ Health Protection Act of 1996, and any
similar provisions of state law applicable to its Employees. The Company does
not have unsatisfied obligations to any Employees or qualified beneficiaries
pursuant to COBRA, HIPAA or any state law governing health care coverage or
extension.
(j) Effect
of Transaction.
The
execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Company Employee
Plan, Employee Agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to
fund
benefits or be deemed a “parachute payment” under Section 280G of the Code with
respect to any Employee.
19
(k) Employment
Matters.
The
Company: (i) to the Knowledge of the Company, it is in compliance, in all
material respects, with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment, termination of employment, employee safety and wages
and hours, and in each case, with respect to Employees; (ii) has withheld and
reported all amounts required by law or by agreement to be withheld and reported
with respect to wages, salaries and other payments to Employees; (iii) to the
Knowledge of the Company is not liable for any arrears of wages, severance
pay
or any taxes or any penalty for failure to comply with any of the foregoing;
and
(iv) to the Knowledge of the Company is not liable for any payment to any trust
or other fund governed by or maintained by or on behalf of any governmental
authority, with respect to unemployment compensation benefits, social security
or other benefits or obligations for Employees (other than routine payments
to
be made in the normal course of business and consistent with past practice).
There are no action, suits, claims or administrative matters pending which
have
been served on the Company, or to the Company’s Knowledge, otherwise pending or
threatened or reasonably anticipated against the Company or any of its Employees
relating to any Employee, Employee Agreement or Company Employee Plan. There
are
no pending, which have been served on the Company, or to the Company’s
Knowledge, otherwise pending or threatened or reasonably anticipated claims
or
actions against Company, any Company trustee under any worker’s compensation
policy. To the Company’s Knowledge, no employee of the Company has violated any
employment contract, nondisclosure agreement, non-competition or
non-solicitation agreement by which such employee is bound due to such employee
being employed by the Company and disclosing to the Company or using trade
secrets or proprietary information of any other person or entity. The services
provided by each of the Company’s and its Affiliate’s Employees is terminable at
the will of the Company and its Affiliates and any such termination would result
in no liability to the Company or any Affiliate.
(l) No
Interference or Conflict.
To the
Knowledge of the Company, no officer, Employee or consultant of the Company
is
obligated under any contract or agreement, subject to any judgment, decree,
or
order of any court or administrative agency that would interfere with such
person’s efforts to promote the interests of the Company or that would interfere
with the Company’s business. Neither the execution nor delivery of this
Agreement, nor the carrying on of the Company’s business as presently conducted
or proposed to be conducted nor any activity of such officers, Employees or
consultants in connection with the carrying on of the Company’s business as
presently conducted or currently proposed to be conducted will, to the Knowledge
of the Company, conflict with or result in a breach of the terms, conditions,
or
provisions of, or constitute a default under, any contract or agreement under
which any of such officers, Employees, or consultants is now bound.
20
(m) International
Employee Plan.
Neither
the Company nor any Affiliate currently or has it ever had the obligation to
maintain, establish, sponsor, participate in, be bound by or contribute to
any
International Employee Plan.
2.13 Labor
Matters.
Neither
the Company nor any of its Subsidiaries is a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company
or any of its Subsidiaries nor does the Company have Knowledge of any activities
or proceedings of any labor union to organize any such employees.
2.14 Restrictions
on Business Activities.
To the
Company’s Knowledge, there is no agreement, commitment, judgment, injunction,
order or decree binding upon the Company or any of its Subsidiaries or their
respective assets or to which the Company or any of its Subsidiaries is a party
which has or could reasonably be expected to have the effect of prohibiting
or
materially impairing any business practice of the Company or any of its
Subsidiaries, any acquisition of property by the Company or any of its
Subsidiaries or the conduct of business by the Company or any of its
Subsidiaries as currently conducted.
2.15 Real
Property.
(a) “Owned
Real Property”
shall
mean each piece of real property owned in fee simple (or with respect to real
property located outside the United States, such other similar form of title
as
may be described in the title policy for such parcel) by the Company or any
of
its Subsidiaries (including all land, easements, development rights and other
rights and interests appurtenant thereto including interests in buildings,
structures, improvements and fixtures located thereon) which Owned Real Property
is described on Schedule
2.15(a)
attached
hereto and made a part hereof. The Owned Real Property constitutes all of the
real property owned by the Company or any of its Subsidiaries in connection
with
the businesses of the Company and its Subsidiaries.
(b) “Leased
Real Property”
shall
mean each property leased, subleased, licensed, or otherwise occupied by the
Company or any of its Subsidiaries pursuant to a lease, sublease, license,
or
other occupancy agreement and all amendments, modifications, and supplements
thereto, excluding leases for individual condominium units at any Owned Real
Property and leases of individual condominium units within the Optioned Property
Projects, all of which condominium unit leases are with Persons not affiliated
with the Company for fair market value on reasonable and customary terms, (each,
a “Lease”)
(including all rights included in any Lease for a Leased Real Property to use
or
occupy any land, buildings, including sales kiosks, and improvements thereon),
which Leased Real Property is described on Schedule
2.15(b)
attached
hereto and made a part hereof. A true, correct and complete copy of each Lease
for each Leased Real Property, except for all bay bottom/submerged land leases
entered into with the Board of Trustees of the Internal Improvement Fund under
the Florida Administrative Code, is described on Schedule
2.15(b)
attached
hereto and made a part hereof, a copy of each of which has been delivered to
Parent or its representatives prior to the date hereof. The Leased Real Property
constitutes all of the real property leased, subleased, licensed, or otherwise
occupied by the Company and any of its Subsidiaries.
21
(c) Each
agreement (an “Optioned
Property Redevelopment Agreement”)
pursuant to which the Company or a Subsidiary, as the case may be, has an option
to purchase all or part of an Optioned Property Project, has a management
agreement and/or ground lease for an Optioned Property Project, or is
redeveloping an Optioned Property Project and each fee or other mortgage
encumbering or other financing with respect to an Optioned Property Project
(an
“Optioned
Property Mortgage”)
is
listed on said Schedule
2.15(c).
There
are no other agreements pursuant to which the Company or a Subsidiary has an
option to purchase all or part of an Optioned Property Project or is managing,
leasing or redeveloping an Optioned Property Project other than those listed
on
said Schedule
2.15(c).
To
Company’s Knowledge, no party is in material default in respect of its
respective obligations under any Optioned Property Redevelopment Agreement
or
under any Optioned Property Mortgage and no act or omission of a party, which,
with the passage of time or the giving of notice or both, would comprise a
default, except for such defaults as would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect
or a
Project Material Adverse Effect. True, correct and complete copies of the
Optioned Property Agreement and each Optioned Property Redevelopment Agreement
and Optioned Property Mortgage described on Schedule
2.15(c)
hereto
have heretofore been delivered to Parent or its representatives prior to the
date hereof.
(d) [Intentionally
Left Blank]
(e) “Real
Property”
shall
mean, collectively, the Owned Real Property, the Leased Real Property, and
the
Optioned Property Projects.
(f) Each
Lease is binding, enforceable, in full force and effect and neither the Company
nor any of its Subsidiaries have received written notice or otherwise have
Knowledge that they are in default or in breach under such Lease except for
such
defaults as would not, individually or in the aggregate, reasonably be expected
to have a Company Material Adverse Effect or a Project Material Adverse Effect.
Neither Company nor any of its Subsidiaries have Knowledge of any event or
omission, which, with the passage of time or the giving of notice or both,
would
comprise a default, except for such defaults as would not, individually or
in
the aggregate, reasonably be expected to have a Company Material Adverse Effect
or a Project Material Adverse Effect. To Company’s Knowledge, no landlord,
sublandlord, licensor or other Person that is a party to any Lease (other than
Company or a Subsidiary) is in default in respect of its obligations under
such
Lease and no event or omission has occurred, which, with the passage of time
or
the giving of notice or both, would cause any such Person to be in default
in a
material respect of its obligations under such Lease. Neither the Company nor
any of its Subsidiaries have received written notice of any claimed abatements,
offsets, defenses or other bases for relief or adjustment under any of the
Leases. The Mergers do not require the consent of any Person or party to any
Lease or any consent the absence of which would not cause a Company Material
Adverse Effect), and will not result in a breach of or default under such Lease,
or otherwise cause such Lease to cease to be legal, valid, binding, enforceable
and in full force and effect following the Closing. No security deposit or
portion thereof deposited with respect to any Lease has been applied in respect
of a breach or default under which Lease which has not been redeposited in
full
by Company or any Subsidiary. Except as may be disclosed in a Lease, the Company
and its Subsidiaries do not owe, nor will they owe in the future, any brokerage
commissions or finder’s fees with respect to such Lease which is not paid. No
party to any Lease (except where such party is the Company or a Subsidiary)
has
an economic interest in the Company or a Subsidiary. Neither the Company nor
any
Subsidiary has (i) assigned, subleased, licensed or otherwise granted any Person
(except where such Person is the Company or a Subsidiary) the right to use
or
occupy such Leased Real Property or any portion thereof, or (ii) collaterally
assigned or granted any other security interest in any Lease or any interest
therein.
22
(g) With
respect to the Real Property, as applicable: (i) the Company, its Subsidiaries
or the Optioned Property Provider, as the case may be, have good and marketable
fee simple interest in the Real Property and a valid leasehold interest in
the
Leased Real Property, free and clear of any use or occupancy restrictions,
Liens, encumbrances, and easements or title defects, except as set forth on
any
existing title insurance policy, deed, or survey, that have had or could have
a
Project Material Adverse Effect or a Material Adverse Effect on the Company’s,
or any of its Subsidiaries’, as the case may be, use and occupancy of the Real
Property or the Optioned Property Projects, as the case may be; and (ii) neither
the Company nor any of its Subsidiaries have received written notice or
otherwise have Knowledge (a) of any condemnation, eminent domain or similar
proceeding affecting any portion of the Real Property or any access thereto
or
of any sale or other disposition of the Real Property or any part thereof in
lieu of condemnation or of any possible widening of streets abutting all or
any
portion of the Real Property, and, to the Knowledge of the Company, no such
proceedings are contemplated, (b) of the imposition of any special taxes or
assessments by a governmental authority, or payments in lieu thereof, against
all or any portion of the Real Property, or any pending improvement liens to
be
made by any governmental authority which may affect any Real Property, (c)
from
or on behalf of any existing insurance carriers indicating that the insurance
rates for all or any portion of any of the Real Property will be substantially
increased or that alterations of any Real Property are required, and (d) the
curtailment of any utility service supplied to any Real Property.
(h) Prior
to
the date hereof, the Company has furnished or made available to Key or its
representatives true and correct copies of all deeds, mortgages, surveys,
licenses, leases, title insurance policies and permanent certificates of
occupancy (or documents equivalent to certificates of occupancy in the
jurisdiction where the Real Property is located) with respect to the Real
Property that are in the possession of Company or its Subsidiaries.
(i) Neither
the Company nor its Subsidiaries have received written notice of, and to the
Knowledge of the Company and its Subsidiaries there are no, outstanding claims
made by or against the Company or any applicable Subsidiary or Optioned Property
Provider with respect to title or ownership of the Owned Real Property or the
Optioned Property Projects.
(j) Neither
the Company nor any of its Subsidiaries is obligated under or a party to, and
none of the Owned Real Property or the Optioned Property Projects is subject
to,
any option, right of first refusal, right of first offer or other obligation
to
sell, transfer, dispose of, grant any interest in or lease any of the Owned
Real
Property or the Optioned Property Projects or any portion thereof or interest
therein to any Person other than (x) the Company and its Subsidiaries or (y)
such leases, subleases, licenses, concessions or other agreements entered into
by the Company or its Subsidiaries in the ordinary course of business (the
documents described in this clause (y), the “Owned
Real Property Leases”),
which
Owned Real Property Leases are described on Schedule
2.15(h)
attached
hereto and made a part hereof. The Owned Real Property Leases are in full force
and effect and neither the Company nor any of its Subsidiaries have received
written notice or otherwise have Knowledge that they are in default or in breach
under any such Lease except for such defaults as would not, individually or
in
the aggregate, reasonably be expected to have a Company Material Adverse Effect.
Neither Company not any Subsidiary has Knowledge of any event or omission under
any Owned Real Property Lease, which, with the passage of time or the giving
of
notice or both, would cause a default except for such defaults as would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. Neither the Company nor any of its Subsidiaries have
received written notice of, or have Knowledge of, any claimed abatements,
offsets, defenses or other bases for relief or adjustment under any Owned Real
Property Lease.
23
(k) All
improvements upon or constituting a part of the Real Property (including, but
not limited to, the buildings, structures, fixtures, roofs and structural
elements thereof and the heating, ventilation, air conditioning, plumbing,
electrical, elevator mechanical, sewer, waste water, storm water, paving and
parking equipment, systems and facilities included therein) (the “Improvements”)
are
adequate for the purposes for which they are being or shall be put in the
ordinary course of business, except for such Improvements that are in the
process of being developed or constructed, which, upon substantial completion,
shall be adequate for the purposes for which they are intended to be used in
the
ordinary course of business. To the Knowledge of the Company, there are no
facts
or conditions affecting any of the Improvements, except for such Improvements
that are in the process of being developed or constructed (which, upon
substantial completion, shall be adequate for the purposes for which they are
intended to be used in the ordinary course of business), which would interfere
in any material respect with the use or occupancy of the Improvements or any
portion thereof in the operation of the business of the Company and its
Subsidiaries or which would, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect or a Project Material Adverse
Effect.
(l) There
are
no Construction Contracts with amounts payable as of December 31, 2006 that
equal or exceed in the aggregate $1,000,000. As used herein, a “Construction
Contract”
shall
mean each development agreement, master architectural contract or general
contractor agreement to which the Company or any of its Subsidiaries is a party
with respect to any present or contemplated construction by the Company or
any
Subsidiary for which no certificate of occupancy has been obtained. To the
Company's Knowledge, it has not received written notice that it or any other
party thereto, is presently in default and there are no facts or circumstances
which, with or without the passage of time or both, would result in a breach
of
any of the terms thereof by it or any such other party, except for such defaults
as would not, individually or in the aggregate reasonably be expected to have
a
Company Material Adverse Effect or a Project Material Adverse
Effect.
(m) Each
condominium declaration related to Real Property in which dwelling units have
been or are being sold by the Company or any of its Subsidiaries that is
required to be filed in the real estate records of the county or other local
jurisdiction in which such Owned Real Property or such Optioned Property Project
is located has been properly filed and recorded with the appropriate county
or
other local jurisdiction office in which the respective Owned Real Property
or
Optioned Property Project is located, except for any failures to be so filed
or
recorded which, individually or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect or a Project Material Adverse
Effect. All such condominium projects comply with Legal Requirements and all
filings and approvals required by Legal Requirements with respect to such
condominium projects have been obtained and all sales of condominium units
have
been conducted in compliance with Legal Requirements.
24
(n) Neither
the Company nor any of its Subsidiaries have any direct or indirect ownership
in, or involvement with or liabilities of any type with respect to, the shopping
center known as the Richland Mall and located in Columbia, South Carolina.
(o) With
respect to the parcel of Owned Real Property described on Schedule
2.15(a)
hereto
as Island Homes (also known as ▇▇▇▇ Cut Island) (“Island
Homes”),
the
Company represents that prior to the Closing (i) the Company shall transfer
ownership of Island Homes to the ▇▇▇▇▇ Trust and/or ▇▇▇▇▇ ▇▇▇▇▇▇▇ or to an
entity that ▇▇▇▇ ▇▇▇▇▇ and/or ▇▇▇▇▇ ▇▇▇▇▇▇▇ directly or indirectly control
(any
of the foregoing, the “Island
Homes Owner”),
(ii)
any contract deposit posted or other expenses incurred by the Company or any
Subsidiary with respect to Island Homes shall be reimbursed/returned by the
Island Homes Owner to the Company or such Subsidiary in connection with such
transfer of ownership, and (iii) the Company shall grant to Key or Parent (at
Key’s option) a right of first refusal to purchase or lease any portion of
Island Homes that the Island Homes Owner intends to sell, lease or transfer
directly or indirectly to any other Person and that the Island Homes Owner
does
not intend to retain ownership of in order to construct single family homes
for
Island Homes Owner and/or its immediate respective families, pursuant to a
document containing mutually agreeable terms and provisions, in recordable
form,
to be executed by each of the Island Homes Owner and Key or Parent (or to a
Key
or Parent Affiliate designated by Key) and recorded prior to the
Closing.
2.16 Taxes.
Definition
of Taxes.
For the
purposes of this Agreement, “Tax”
or
“Taxes”
refers
to any and all federal, state, local and foreign taxes, including, without
limitation, gross receipts, income, profits, sales, use, occupation, value
added, ad valorem, transfer, franchise, withholding, payroll, recapture,
employment, excise and property taxes, assessments, governmental charges and
duties together with all interest, penalties and additions imposed with respect
to any such amounts and any obligations under any agreements or arrangements
with any other person with respect to any such amounts and including any
liability of a predecessor entity for any such amounts.
(a) Tax
Returns and Audits.
(i) As
of the
Closing Date, the Company and each of its Subsidiaries has filed all federal,
state, local and foreign returns, estimates, information statements and reports
relating to Taxes (“Returns”)
required to be filed by the Company and each of its Subsidiaries with any Tax
authority prior to the date hereof. To the Company’s Knowledge, all such Returns
are true, correct and complete in all material respects. As of the Closing
Date,
the Company and each of its Subsidiaries has paid all Taxes shown to be due
on
such Returns. The Company is not a “United States real property holding
corporation,” as defined in section 897 of the Internal Revenue Code of 1986, as
amended, and Section 1.897-2(b) of the regulations promulgated
thereunder.
25
(ii) As
of the
Closing Date, all material Taxes that the Company or any of its Subsidiaries
is
required by law to withhold or collect have been duly withheld or collected,
and
have been paid over to the proper governmental authorities to the extent due
and
payable.
(iii) As
of the
Closing Date, none of the Company or any of its Subsidiaries will be delinquent
in the payment of any material Tax nor is there any material Tax deficiency
outstanding, assessed or, to the Knowledge of the Company, proposed against
the
Company or any of its Subsidiaries, nor will the Company or any of its
Subsidiaries have executed any unexpired waiver of any
statute of limitations extending or waiving the period for the assessment or
collection of any Tax.
(iv) To
the
Company’s Knowledge, no audit or other examination of any Return of the Company
or any of its Subsidiaries by any Tax authority is presently in progress.
Neither the Company nor any of its Subsidiaries has been notified in writing
of
any request for such an audit or other examination.
(v) No
adjustment relating to any Returns filed by the Company or any of its
Subsidiaries has been proposed in writing, formally or informally, by
any
Tax
authority to the Company or any of its Subsidiaries or any of the officers
and
directors thereof.
(vi) As
of the
Closing Date, neither the Company nor any of its Subsidiaries has any liability
for any material unpaid Taxes which have not been accrued for or reserved on
the
Company’s balance sheets included in the Audited Financial Statements or the
Unaudited Financial Statements, whether asserted or unasserted, contingent
or
otherwise, would constitute a Company Material Adverse Effect, other than any
liability for unpaid Taxes that may have accrued since the end of the most
recent fiscal year in connection with the operation of the business of the
Company and its Subsidiaries in the ordinary course of business.
2.17 Environmental
Matters.
(a) To
the
Company’s Knowledge, no facts or circumstances exist with respect to the Real
Property which give rise to any liability based upon or related to the
Company’s, any Subsidiary’s or any other Person’s actions or omissions in the
processing, distribution, use, treatment, storage, disposal, transport or
handling, or the emission, discharge or release into the environment of any
Hazardous Substance, except where such liability would not have a Material
Adverse Effect on the Company.
(b) As
used
in this Agreement, the term “Hazardous
Substance”
shall
mean
any
substance that is: (i) listed, classified or regulated pursuant to any
Environmental Law; (ii) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls or
radioactive materials; or (iii) any other substance which is regulated under
any
Environmental Law.
(c) Except
for such matters that, individually or in the aggregate are not reasonably
likely to have a Material Adverse Effect or a Project Material Adverse Effect
to
the Company’s Knowledge: (i) the Company and each of its Subsidiaries has
complied at all times and is currently in compliance with all Environmental
Laws; (ii) there are no Hazardous Substances at, in, under or from the Real
Property; and (iii) there has been no release or threatened release of Hazardous
Substances at, in, under or from the Real Property.
26
(d) Except
for those items that individually or in the aggregate are not reasonably likely
to cause a Company Material Adverse Effect or a Project Material Adverse Effect:
(i) there are no pending or, to the Knowledge of the Company, threatened claims,
demands, actions, administrative proceedings, lawsuits or inquiries relating
to
the Real Property under Environmental Law; (ii) neither the Company nor any
of
its Subsidiaries has received any notice, demand, letter, claim or request
for
information alleging that the Company or any of its Subsidiaries may be in
violation of or liable under any Environmental Law; and (iii) neither the
Company nor any of its Subsidiaries is subject to any agreements, orders,
decrees, injunctions or other arrangements with any Governmental Entity or
other
Person relating to liability under any Environmental Law or relating to
Hazardous Substances.
(e) Except
as
disclosed in Schedule
2.17(e)
hereto
and to the Knowledge of the Company, there are no underground storage tanks
at
any Real Property.
(f) As
used
in this Agreement, the term “Environmental
Law”
shall
mean
any
federal, state, local or foreign law, regulation, order, decree, permit,
authorization, opinion, common law or agency requirement relating to: (A) the
protection, investigation or restoration of the environment, health and safety,
or natural resources; (B) the handling, use, presence, disposal, release or
threatened release of any Hazardous Substance; or (C) noise, odor, wetlands,
pollution, contamination or any injury or threat of injury to persons or
property.
(g) The
parties hereto acknowledge that the Company and its Subsidiaries may be in
various stages of obtaining Material Permits, including, without limitation,
any
Material Permits related to any Environmental Law, as of the date of this
Agreement and the Company and/or the applicable Subsidiary agree to use
commercially reasonable best efforts from and after the date hereof to obtain
and comply with such Material Permits, including, without limitation, any
Material Permit relating to Environmental Laws as and when required by any
Legal
Requirements and Environmental Laws, it being agreed that any failure to obtain
such Material Permits as of the Closing shall not individually or in the
aggregate be reasonably expected to have a Company Material Adverse Effect
or a
Project Material Adverse Effect.
(h) Except
for those items that have been delivered to Parent, there are no environmental
investigations, studies or audits with respect to the Real Property.
2.18 Brokers;
Third Party Expenses.
The
Company has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage, finders’ fees, agent’s commissions or any similar
charges in connection with this Agreement or any transactions contemplated
hereby. Except pursuant to Sections 1.6, 1.7 and 1.17, no shares of common
stock, options, warrants or other securities of either the Company or Key or
Parent are payable to any third party by Company as a result of the
Mergers.
2.19 Intellectual
Property.
For the
purposes of this Agreement, the following terms have the following
definitions:
27
“Intellectual
Property”
shall
mean any or all of the following and all worldwide common law and statutory
rights in, arising out of, or associated therewith: (i) patents and applications
therefor and all reissues, divisions, renewals, extensions, provisionals,
continuations and continuations-in-part thereof; (ii) inventions (whether
patentable or not), invention disclosures, improvements, trade secrets,
proprietary information, know how, technology, technical data and customer
lists, and all documentation relating to any of the foregoing; (iii) copyrights,
copyrights registrations and applications therefor, and all other rights
corresponding thereto throughout the world; (iv) software and software programs;
(v) domain names, uniform resource locators and other names and locators
associated with the Internet; (vi) industrial designs and any registrations
and
applications therefor; (vii) trade names, logos, common law trademarks and
service marks, trademark and service ▇▇▇▇ registrations and applications
therefor (collectively, “Trademarks”);
(viii) all databases and data collections and all rights therein; (ix) all
moral
and economic rights of authors and inventors, however denominated, and (x)
any
similar or equivalent rights to any of the foregoing (as
applicable).
“Company
Intellectual Property”
shall
mean any Intellectual Property that is owned by, or exclusively licensed to,
Company or any of its Subsidiaries, including software and software
programs developed by or exclusively licensed to the Company or any of its
Subsidiaries (specifically excluding any off the shelf or shrink-wrap
software).
(a) No
Company Intellectual Property is subject to any material proceeding or
outstanding decree, order, judgment, contract, license, agreement or stipulation
restricting in any manner the use, transfer or licensing thereof by the Company
or any of its Subsidiaries, or which may affect the validity, use or
enforceability of such Company Intellectual Property, which in any such case
could reasonably be expected to have a Material Adverse Effect on the
Company.
(b) The
Company and each of its Subsidiaries, as the case may be:
own
and
has good and exclusive title to, or in the case of exclusive licenses, has
the
right to use, each material item of Company Intellectual Property, owned by,
or
exclusively licensed to, either the Company or a Subsidiary, as the case may
be,
free and clear of any liens and encumbrances (excluding non-exclusive licenses
and related restrictions granted by it in the ordinary course of business);
and
the Company or its Subsidiaries is the exclusive owner of all material
registered Trademarks used in connection with the operation or conduct of its
business as currently conducted including the sale of any products or the
provision of any services by the Company or its Subsidiaries.
2.20 Infringement
on Intellectual Property.
To the
Company’s Knowledge, the operation of the business of the Company and its
Subsidiaries as such business currently is conducted has not and does not
infringe or misappropriate the Intellectual Property of any third party or
constitute unfair competition or trade practices under the laws of any
jurisdiction. No written notice, charge, claim, action or assertion of
infringement, unfair competition, unfair trade practices or misappropriation
has
been received by the Company or any of its Subsidiaries and, to the Company’s
Knowledge, no written notice, charge, claim, action has been filed, commenced
or
threatened against the Company or any of its Subsidiaries alleging any such
violation that could be expected to have a Company Material Adverse
Effect.
2.21 Agreements,
Contracts and Commitments.
28
(a) Except
for any items that are included in another schedule attached hereto or excluded
by virtue of another representation included in this Article II, Schedule
2.21
hereto
sets forth a complete and accurate list of all
Material Company Contracts (as hereinafter defined), specifying the parties
thereto. For
purposes of this Agreement the term “Company
Contracts”
shall
mean all contracts, agreements, leases, mortgages, indentures, notes, bonds,
Optioned Property Redevelopment Agreements, licenses, permits, franchises,
purchase orders, sales orders, and other understandings, commitments and
obligations of any kind, whether written or oral, to which the Company or any
of
its Subsidiaries is a party or by or to which any of the properties or assets
of
the Company or any of its Subsidiaries may be bound, subject or affected
(including without limitation notes or other instruments payable to the Company
or its Subsidiaries). For purposes of this Agreement the term “Routine
Operating Contracts”
shall
mean contracts entered into by the Company or any of its Subsidiaries with
a
Person that is not an Affiliate in the ordinary course of business on terms
and
conditions and at rates that are reasonable and customary based on the then
applicable market conditions including the following contracts (to the extent
they meet the immediately foregoing condition):
(i) contracts
related to the sale of individual residential condominium units to unaffiliated
purchasers who, together with their affiliates, are not purchasing more than
an
aggregate of ten units in any individual project;
(ii) brokerage
commission agreements;
(iii) contracts
pursuant to which the Company or a Subsidiary, as the case may be, has deposited
funds which will be returned in full to the Company or such Subsidiary in the
event the Company or such Subsidiary terminates such contract pursuant to a
contingency or termination provision contained in such contract; and
(iv) any
contract that by its terms can be terminated by the Company or any Subsidiary
on
not more than 30 days of notice with resulting liability that is less than
$100,000.
(b) For
purposes of this Agreement the term “Material
Company Contracts”
shall
mean:
(i)
each
Company Contract that is not a Routine Operating Contract and (I) which provides
for payments (present or future) to the Company or any of its Subsidiaries
in
excess of $500,000 in the aggregate or (II) under which or in respect of which
the Company or any of its Subsidiaries presently has any liability or obligation
of any nature whatsoever (absolute, contingent or otherwise) in excess of
$1,500,000,
(ii) each
Company Contract that is not a Routine Operating Contract and that otherwise
is
or may be material to the businesses, operations, assets or condition (financial
or otherwise) of the Company and its Subsidiaries and
(iii) without
limitation of subclause (i) or subclause (ii), each of the following Company
Contracts, the relevant terms of which remain executory:
29
1) any
mortgage, indenture, note, installment obligation or other instrument, agreement
or arrangement for or relating to any borrowing of money by or from the Company
or any of its Subsidiaries, or any officer, director, stockholder or Member
(“Insider”)
of the
Company or any of its Subsidiaries;
2) any
guaranty, direct or indirect, by the Company, any of its Subsidiaries or any
Insider of any obligation for borrowings, or otherwise, excluding endorsements
made for collection in the ordinary course of business and guarantees by
Subsidiaries of Company obligations;
3) any
Company Contract of employment;
4) any
Company Contract made other than in the ordinary course of business or (x)
providing for the grant of any preferential rights to
purchase or lease any asset of the Company or any of its Subsidiaries or (y)
providing for any right (exclusive or non-exclusive) to sell or distribute,
or
otherwise relating to the sale or distribution of, any product or service of
the
Company and its Subsidiaries;
5) any
obligation to register any shares of the capital stock or other securities
of
the Company or any of its Subsidiaries with any Governmental
Entity;
6) any
obligation to make payments, contingent or otherwise, arising out of the prior
acquisition of the business, assets or stock of
other
Persons;
7) any
collective bargaining agreement with any labor union;
8) any
lease
or similar arrangement for the use by the Company or any of its Subsidiaries
of
personal property (other than leases of vehicles, office equipment or operating
equipment where the annual lease payments are less than $100,000 in the
aggregate); and
9) any
Company Contract to which any Insider is a
party.
(c) To
the
Knowledge of the Company, each Company Contract was entered into at arms’ length
and in the ordinary course, is in full force and effect and is valid and binding
upon and
enforceable against each of the parties thereto. True, correct and complete
copies of all Material Company Contracts (or written summaries in the case
of
oral Material Company Contracts) have been heretofore made available to
Parent
or
Parent’s
counsel.
(d) Neither
the Company nor any of its Subsidiaries nor, to the best of Company’s Knowledge,
any other party thereto, has received written notice that it is in breach of
or
in default under, and no event has occurred which with notice or lapse of time
or both would become a breach of or default under, any Material Company
Contract. No party to any Company Contract has given any written notice of
any
claim of any breach, default or event, which, individually or in the aggregate,
are reasonably likely to have a Material Adverse Effect on the Company or any
of
its Subsidiaries or a Project Material Adverse Effect. Each Material Company
Contract to which the Company or any of its Subsidiaries is a party or by which
it is bound that has not expired by its terms is in full force and
effect.
30
2.22 Employees.
(a) Schedule 2.22(a)
sets
forth a true, complete and correct list of all directors and executive officers
of the Company and its Subsidiaries along with their position and actual annual
rate of compensation. To the Knowledge of the Company, no key employee or group
of employees has threatened to terminate employment with the Company or any
of
its Subsidiaries or, to the Knowledge of the Company, has plans to terminate
such employment.
(b) Neither
the Company nor any of its Subsidiaries is a party to or bound by any union
or
collective bargaining agreement, nor has any of them experienced any strikes,
grievances, claims of unfair labor practices or other collective bargaining
disputes.
(c) Neither
the Company nor any of its Subsidiaries is a party to any written or oral:
(i)
agreement with any current or former employee the benefits of which are
contingent upon, or the terms of which will be materially altered by, the
consummation of the transactions contemplated by this Agreement; (ii) agreement
with any current or former employee of the Company or any of its Subsidiaries
providing any term of employment or compensation guarantee extending for a
period longer than one year from the date hereof or for the payment of
compensation in excess of $100,000 per annum; or (iii) agreement or plan the
benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, upon the consummation of the transactions contemplated
by
this Agreement.
2.23 Insurance.
Schedule
2.23
sets
forth a list of all material insurance policies covering the properties and
activities of the Company, its Subsidiaries and their respective businesses.
All
such policies are in full force and effect and shall be kept in full force
and
effect in the ordinary course of business. Neither the Company nor any
Subsidiary of the Company have received any written notice of cancellation or
non-renewal with respect to such policies. Neither the Company nor any
Subsidiary of the Company have received written notice, nor does the Company
have Knowledge that it is in default with respect to its obligations under
such
insurance policies. Except as set forth on Schedule
2.23,
neither
the Company nor any Subsidiary of the Company has been refused any insurance
coverage obtained for the purpose of protecting and insuring against any
material loss or exposure, nor has any such coverage been limited or cancelled
by any insurance carrier to which the Company or any such Subsidiary has applied
for any such insurance or with which the Company or any such Subsidiary has
carried insurance, nor has there been any significant increase in the premiums
paid under any such policy during the past five (5) years. All such insurance
policies provide adequate coverage for all normal risks incident to the business
of the Company and its Subsidiaries and their respective properties and assets,
including construction projects. Schedule
2.23
identifies those pending (or threatened) Actions with respect to which an
insurance carrier has denied coverage or has advised the Company or the relevant
Subsidiary that it is defending such claim under reservation of rights and
which, if determined or resolved adversely to the Company or its Subsidiaries,
could, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect to the Company and its Subsidiaries or a Project
Material Adverse Effect.
2.24 Interested
Party Transactions.
As of
the Closing Date, except for compensation and benefits arrangements in the
ordinary course of business or any matter pursuant to this Agreement, and to
the
Company’s Knowledge, no holder of more than five percent (5%) of the Company
Membership Interests, officer or director of the Company or any Subsidiary
of
the Company, or any affiliate of any of the foregoing (other than the Company
and its Subsidiaries) (i) has borrowed or loaned money or other property to
the
Company or any Subsidiary of the Company in an amount exceeding $50,000, which
has not been repaid or returned; (ii) has any direct or indirect material
interest in any Person which is a customer of goods or services provided by
or
supplier of goods or services provided to the Company, any Subsidiary of the
Company, which Person's purchases or sales of such goods and services in any
of
the past two (2) fiscal years exceeded or whose business in fiscal 2007 is
expected to exceed $120,000 per year; or (iii) is party to any other agreement,
transaction or business relationship with the Company (other than this
Agreement) or any of its Subsidiaries.
31
2.25 Board
Approval; Required Vote.
(a) The
board
of
directors
of the
Company has, as of the date of this Agreement, determined (i) that the Mergers
are fair to, and in the best interests of the Company and its Members, and
(ii)
to, subject to Section 5.16, recommend that the Members of the Company approve
this Agreement.
(b) The
Requisite Member Approval is the only vote of the holders of any class or series
of the Company Membership Interests necessary to approve and adopt this
Agreement or the other transactions contemplated hereby.
2.26 Proxy
Statement.
The
information to be supplied by the Company for inclusion in Key’s proxy statement
(such proxy statement as amended or supplemented is referred to herein as the
“Proxy
Statement”)
shall
not at the time the Proxy Statement is filed with the SEC and at the time it
becomes effective under the Securities Act, contain any untrue statement of
a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. The
information to be supplied by the Company for inclusion in the proxy statement
to be sent in connection with the Key Stockholders’ Meeting (as defined in
Section 5.1(a)) shall not, on the date the Proxy Statement is first mailed
to
Key’s stockholders, and at the time of the Key Stockholders’ Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not false
or
misleading; or omit to state any material fact necessary to correct any
statement provided by the Company in any earlier communication with respect
to
the solicitation of proxies for the Key Stockholders’ Meeting which has become
false or misleading. If at any time prior to the Effective Time, any event
relating to the Company or any of its affiliates, officers or directors should
be discovered by the Company which should be set forth in a supplement to the
Proxy Statement, the Company shall promptly inform Key; provided, however,
that
if Key fails to timely file such supplement or fails to adequately disclose
such
additional information, that the Company shall have no liability whatsoever
to
Key, Parent, any Merger Sub or any of Parent’s, Key’s or any Merger Sub’s
shareholders, members, directors or officers. Notwithstanding the foregoing,
the
Company makes no representation or warranty with respect to any information
supplied by Key, Parent, any Merger Sub or any Person other than the Company
which is contained in any of the foregoing documents.
32
2.27 Representations
and Warranties Complete.
The
representations and warranties of the Company included in this Agreement, as
modified by the Company Disclosure Schedule, are true and complete in all
material respects and do not contain any untrue statement of a material fact
or
omit to state a material fact required to be stated therein or necessary to
make
the statements contained therein not misleading, under the circumstance under
which they were made. Except for the representations and warranties made by
the
Company in this Agreement, neither the Company nor any other Person makes any
representation or warranty with respect to the Company or its Subsidiaries
or
their respective business, operations, assets, liabilities, condition (financial
or otherwise) or prospects, notwithstanding the delivery or disclosure to Key
or
any of its Affiliates or representatives of any documentation, forecasts,
projections or other information with respect to any one or more of the
foregoing.
2.28 Survival
of Representations and Warranties.
The
representations and warranties of the Company set forth in this Agreement shall
survive the Closing for a period of 12 months from the Closing Date.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF KEY
Key,
on
behalf of itself and its Subsidiaries, represents and warrants to the Company
that the statements contained in this Article III are true, complete and
correct. As used in this Agreement, a “Key
Material Adverse Effect”
shall
mean
any
change, event or effect that is materially adverse to the business, assets
(including, without limitation, intangible assets), financial condition, results
of operations or reasonably foreseeable prospects of Key and its Subsidiaries,
taken as a whole.
3.1 Organization
and Qualification.
(a) Each
of
Key, Parent and New Key Merger Sub is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite corporate power and authority to own, lease and operate its assets
and properties and to carry on its business as it is now being or currently
planned by it to be conducted. Each of Key, Parent and New Key Merger Sub is
in
possession of all Approvals necessary to own, lease and operate the properties
it purports to own, operate or lease and to carry on its business as it is
now
being or currently planned by it to be conducted, except where the failure
to
have such Approvals could not, individually or in the aggregate, reasonably
be
expected to have a Material Adverse Effect on it. None of Key, Parent or New
Key
Merger Sub is in violation of any of the provisions of its Charter Documents.
(b) Key
Merger Sub is a limited liability company, duly formed, validly existing and
in
good standing under the laws of the State of Florida and has the requisite
corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being or currently planned
by Key to be conducted. Key Merger Sub is not in violation of any of the
provisions of its operating agreement.
(c) Each
of
Key, Parent, and each Merger Sub is duly qualified or licensed to do business
as
a foreign corporation or foreign limited liability company, as applicable,
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 activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that could not, individually or
in
the aggregate, reasonably be expected to have a Material Adverse Effect on
it.
33
3.2 Subsidiaries.
Except
for New Key Merger Sub, Key Merger Sub and Parent, Key has no Subsidiaries
and
does not own, directly or indirectly, any ownership, equity, profits or voting
interest in any Person or has any agreement or commitment to purchase any such
interest, and Key has not agreed and is not obligated to make nor is bound
by
any written, oral or other agreement, contract, subcontract, lease, binding
understanding, instrument, note, option, warranty, purchase order, license,
sublicense, insurance
policy, benefit plan, commitment or undertaking of any nature, as of the date
hereof or as may hereafter be in effect under which it may become obligated
to
make, any future investment in or capital contribution to any other
entity.
3.3 Capitalization.
(a) As
of the
date of this Agreement, the authorized capital stock of Key consists of
50,000,000 shares of common stock, par value $0.001 per share (“Key
Common Stock”)
and
1,000,000 shares of preferred stock, par value $0.001 per share (“Key
Preferred Stock”),
of
which 7,949,995 shares of Key Common Stock and no shares of Key Preferred Stock
are issued and outstanding, all of which are validly issued, fully paid and
nonassessable. Except as set forth in Schedule
3.3(a),
(i) no
shares of Key Common Stock or Key Preferred Stock are reserved for issuance
upon
the exercise of outstanding options to purchase Key Common Stock or Key
Preferred Stock granted to employees of Key or other parties (“Key
Stock Options”)
and
there are no outstanding Key Stock Options; (ii) no shares of Key Common Stock
or Key Preferred Stock are reserved for issuance upon the exercise of
outstanding warrants to purchase Key Common Stock or Key Preferred Stock
(“Key
Warrants”)
and
there are no outstanding Key Warrants; and (iii) no shares of Key Common Stock
or Key Preferred Stock are reserved for issuance upon the conversion of the
Key
Preferred Stock or any outstanding convertible notes, debentures or securities
(“Key
Convertible Securities”).
All
shares of Key Common Stock and Key Preferred Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the instrument
pursuant to which they are issuable, will be duly authorized, validly issued,
fully paid and nonassessable. All outstanding shares of Key Common Stock and
all
outstanding Key Warrants have been issued and granted in compliance with (x)
all
applicable federal and state securities laws and (in all material respects)
other applicable laws and regulations, and (y) all requirements set forth in
any
applicable Key Contracts (as defined in Section 3.14(a)). Key has heretofore
delivered to the Company true, complete and accurate copies of the Key Warrants,
including any and all documents and agreements relating thereto.
(b) The
authorized capital stock of Parent consists of 150,000,000 shares of common
stock, par
value
$0.001 per share (“Parent
Stock”),
of
which
100 shares are issued and outstanding, and 1,000,000 shares of preferred stock,
par value $0.001 per share, of which no shares are issued and outstanding.
All
of the outstanding shares of Parent Stock have been validly issued,
are
fully paid and nonassessable and are owned directly by Key free and clear of
any
Lien. The authorized capital stock of New Key Merger Sub consists of 3,000
shares of common stock, $0.001 par value per share, of which 100 shares are
issued and outstanding and all of which 100 shares have been validly
issued,
are fully paid and nonassessable and are owned directly by Parent free and
clear
of any Lien. All of the membership interests of Key Merger Sub are owned by
Parent. As
of the
date hereof, there are no shares of voting or non-voting capital stock, equity
interests, percentage interests or other securities of the Key Merger Sub
authorized, issued, reserved for issuance or otherwise outstanding.
34
(c) The
shares of Parent Common Stock to be issued by Key in connection with the
Mergers, upon issuance in accordance with the terms of this
Agreement, will be duly authorized and validly issued and such shares of Parent
Common Stock will be fully paid and nonassessable.
(d) Except
as
set forth in Schedule
3.3(c)
or as
contemplated by this Agreement or the Key SEC Reports (as defined in Section
3.7(a)), there are no registrations rights, and there is no voting trust,
proxy,
rights plan, antitakeover plan or other agreements or understandings to which
Key is a party or by which Key is bound with respect to any equity security
of
any class of Key.
3.4 Authority
Relative to this Agreement.
Each of
Key, Parent and each Merger Sub have full corporate power and authority to:
(i)
execute, deliver and perform this Agreement, and each ancillary document which
Key, Parent or New Key Merger Sub have executed or delivered or is to execute
or
deliver pursuant to this Agreement, and (ii) carry out Key’s, Parent’s and each
Merger Sub’s respective obligations hereunder and thereunder and, to consummate
the transactions contemplated hereby (including the Mergers). The execution
and
delivery of this Agreement and the consummation by Key, Parent and each Merger
Sub of the transactions contemplated hereby (including the Mergers) have been
duly and validly authorized by all necessary corporate action on the part of
Key, Parent and each Merger Sub (including the approval by their respective
board
of
directors),
and no
other corporate proceedings on the part of Key, Parent or either Merger Sub
are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby, other than the Key Stockholder Approval (as defined in
Section 5.1(a)). This Agreement has been duly and validly executed and delivered
by Key, Parent and each Merger Sub and, assuming the due authorization,
execution and delivery thereof by the other parties hereto, constitutes the
legal and binding obligation of Key, Parent and each Merger Sub, enforceable
against Key, Parent and each Merger Sub in accordance with its terms, except
as
may be limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors’ rights generally and by general
principles of equity.
3.5 No
Conflict; Required Filings and Consents.
(a) The
execution and delivery of this Agreement by Key, Parent and each Merger Sub
do
not, and the performance of this Agreement by Key, Parent and each Merger Sub
shall not: (i) conflict with or violate Key’s, Parent’s or any Merger Sub’s
Charter Documents, (ii) conflict with or violate any Legal Requirements, or
(iii) result in any breach of or constitute a default (or any event that with
notice or lapse of time or both would become a default) under, or materially
impair Key’s rights or alter the rights or obligations of any third party under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any
of
the properties or assets of Key pursuant to, any Key Contracts, except, with
respect to clauses (ii) or (iii), for any such conflicts, violations, breaches,
defaults or other occurrences that would not, individually and in the aggregate,
have a Material Adverse Effect on Key.
35
(b) The
execution and delivery of this Agreement by Key, Parent and each Merger Sub
do
not, and the performance of their respective obligations hereunder will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except (i) as set forth in this
Agreement, (ii) for applicable requirements, if any, of the Securities Act,
the
Exchange Act, Blue Sky Laws, and the rules and regulations thereunder, and
appropriate documents with the relevant authorities of other jurisdictions
in
which Key and Parent is qualified to do business, (iii) for the filing of any
notifications required under the HSR Act and the expiration of the required
waiting period thereunder, (iv) the qualification of Key and Parent as a foreign
corporation in those jurisdictions in which the business of the Company makes
such qualification necessary, and (v) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not, individually or in the aggregate, reasonably be expected to have
a
Material Adverse Effect on Key, or prevent consummation of the Mergers or
otherwise prevent the parties hereto from performing their obligations under
this Agreement.
3.6 Compliance.
Key has
complied with, is not in violation of, any Legal Requirements with respect
to
the conduct of its business, or the ownership or operation
of its business, except for failures to comply or violations which, individually
or in the aggregate, have not had and are not reasonably likely to have a
Material Adverse Effect on Key.
The
business and activities of Key
have
not
been and are not being conducted in violation of any Legal Requirements.
Key
is
not in
default or violation of any term, condition or provision of its Charter
Documents. No written notice of non-compliance with any Legal Requirements
has
been received by Key.
3.7 SEC
Filings; Financial Statements.
(a) Key
has
made available to the Company and the Members a correct and complete copy of
each report, registration statement and definitive proxy statement filed by
Key
with the SEC (the “Key
SEC Reports”),
which
are all the forms, reports and documents required to be filed by Key with the
SEC prior to the date of this Agreement and which were filed on a timely basis.
As of their respective dates the Key SEC Reports: (i) were prepared in
accordance and complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Key SEC Reports, and (ii)
did not at the time they were filed (and if amended or superseded by a filing
prior to the date of this Agreement then on the date of such filing and as
so
amended or superseded) contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order
to
make the statements therein, in light of the circumstances under which they
were
made, not misleading. Except to the extent set forth in the preceding sentence,
Key makes no representation or warranty whatsoever concerning the Key SEC
Reports as of any time other than the time they were filed.
(b) Each
set
of financial statements (including, in each case, any related notes thereto)
contained in Key SEC Reports, including each Key SEC Report filed after the
date
hereof until the Closing, complied or will comply as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, was or will be prepared in accordance with U.S. GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated
in
the notes thereto or, in the case of unaudited statements, do not contain
footnotes as permitted by Form 10-QSB of the Exchange Act) and each fairly
presents or will fairly present in all material respects the financial position
of Key at the respective dates thereof and the results of its operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements were, are or will be subject to normal adjustments which
were not or are not expected to have a Material Adverse Effect on Key taken
as a
whole.
36
3.8 No
Undisclosed Liabilities.
(a) Key
has
no liabilities (absolute, accrued, contingent or otherwise) of a nature required
to be disclosed on a balance sheet or in the related notes to the financial
statements included in Key SEC Reports which are, individually or in the
aggregate, material to the business, results of operations or financial
condition of Key, except (i) liabilities provided for in or otherwise disclosed
in Key SEC Reports filed prior to the date hereof, and (ii) liabilities incurred
since September 30, 2006 in the ordinary course of business, none of which
would
have a Material Adverse Effect on Key.
(b) Since
their respective dates of incorporation or formation, none of Parent or either
Merger Sub has carried on any business or conducted any operations other than
the execution of this Agreement, the performance of its obligations hereunder
and thereunder and matters ancillary thereto. Parent and the Merger Subs have
no
assets or properties of any kind, and have and will have at the Closing no
obligations or liabilities of any nature whatsoever except such obligations
and
liabilities as are imposed under this Agreement.
3.9 Absence
of Certain Changes or Events.
Except
as set forth in Key SEC Reports filed prior to the date of this Agreement,
and
except as contemplated by this Agreement, since September 30, 2006, there has
not been: (a) any Material Adverse Effect on Key, (b) any declaration, setting
aside or payment of any dividend on, or other distribution (whether in cash,
stock or property) in respect of, any of Key’s capital stock, or any purchase,
redemption or other acquisition by Key of any of Key’s capital stock or any
other securities of Key or any options, warrants, calls or rights to acquire
any
such shares or other securities, (c) any split, combination or reclassification
of any of Key’s capital stock, (d) any granting by Key of any increase in
compensation or fringe benefits, except for normal increases of cash
compensation in the ordinary course of business consistent with past practice,
or any payment by Key of any bonus, except for bonuses made in the ordinary
course of business consistent with past practice, or any granting by Key of
any
increase in severance or termination pay or any entry by Key into any currently
effective employment, severance, termination or indemnification agreement or
any
agreement the benefits of which are contingent or the terms of which are
materially altered upon the occurrence of a transaction involving Key of the
nature contemplated hereby, (e) entry by Key into any licensing or other
agreement with regard to the acquisition or disposition of any Intellectual
Property other than licenses in the ordinary course of business consistent
with
past practice or any amendment or consent with respect to any licensing
agreement filed or required to be filed by Key with respect to any Governmental
Entity, (f) any material change by Key in its accounting methods, principles
or
practices, except as required by concurrent changes in U.S. GAAP, (g) any change
in the auditors of Key, (h) any issuance of capital stock of Key, or (i) any
revaluation by Key of any of its assets, including, without limitation, writing
down the value of capitalized inventory or writing off notes or accounts
receivable or any sale of assets of Key other than in the ordinary course of
business.
37
3.10 Litigation.
There
are no claims, suits, actions or proceedings pending or to Key’s Knowledge,
threatened against Key, before any court, governmental
department, commission, agency, instrumentality or authority, or any arbitrator
that seeks to restrain or enjoin the consummation of the transactions
contemplated by this Agreement or which could reasonably be expected, either
singularly or in the aggregate with all such claims, actions or proceedings,
to
have a Material Adverse Effect on Key
or
have a
Material Adverse Effect on the ability of the parties hereto to consummate
the
Mergers.
There
has
not been, and to the Knowledge of Key, there is not pending or contemplated,
any
investigation by the SEC or any state or other regulatory body involving Key
or
any current or former director or officer of Key. The SEC has not issued any
stop order or other order suspending the effectiveness of any registration
statement filed by Key under the Exchange Act or the Securities
Act.
3.11 Restrictions
on Business Activities.
Except
as set forth in the Key Charter Documents, there is no agreement, commitment,
judgment, injunction, order or decree binding upon Key or to which Key is a
party which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any business practice of Key, any
acquisition of property by Key or the conduct of business by Key as currently
conducted other than such effects, individually or in the aggregate, which
have
not had and could not reasonably be expected to have, a Material Adverse Effect
on Key.
3.12 Taxes.
(a) Key
has
timely filed all Returns required to be filed by Key with any Tax authority
prior to the date hereof, except such Returns which are not material to Key.
All
such Returns are true, correct and complete in
all
material respects. All Taxes due and owing by Key
(whether
or not shown on any Return) have been paid. Key
is
not
the beneficiary of any extension of time within which to file any Return. There
are no Liens for Taxes (other than Taxes not yet due and payable) upon any
of
the assets of Key
or
any of
its Subsidiaries.
(b) All
Taxes
that Key is required by law to withhold or collect have been duly withheld
or
collected, and have been timely paid over to the proper
governmental authorities to the extent due and payable.
(c) Key
has
not been delinquent in the payment of any material Tax nor is there any material
Tax deficiency outstanding, assessed, or proposed by any Tax authority based
on
personal contact by Key or any officers or directors of Key with any agent
of
any such Authority,
nor has
Key
executed
any unexpired waiver of any statute of limitations extending or waiving the
period for the assessment or collection of any Tax.
(d) No
audit
or other examination of any Return of Key by any Tax authority is presently
in
progress, nor has Key, including through notice to its officers and directors,
been notified of any request
or proposal for any such an audit or other examination.
(e) No
claim
dispute or adjustment relating to any Tax liability of Key has been raised
or
proposed, formally or informally, by any Tax authority to Key or any
director
or officer of Key.
38
(f) Key
has
no liability for any material unpaid Taxes which have not been accrued for
or
reserved on Key’s balance sheets included in the audited financial statements
for the most recent fiscal year ended, whether asserted or unasserted,
contingent or otherwise, which would constitute a Key Material Adverse Effect,
other than any liability for unpaid Taxes that may have accrued since the end
of
the most recent fiscal year in connection with the operation of the business
of
Key in the ordinary course of business.
(g) Key,
the
directors and officers of Key, or any of its Affiliates do not have Knowledge
of
any fact and have not taken or agreed to take any action, failed to take any
action or is aware of any fact or circumstance, that could prevent the
transactions contemplated hereby from qualifying as a tax-free contribution
governed by Section 351(a) of the Code.]
(h) Key
is
not a party or bound to any tax allocation or sharing agreement. Key (i) has
not
been a member of an Affiliated Group filing a consolidated federal Income Tax
Return (other than a group the common parent of which was Key), or (ii) has
no
liability for the Taxes of any Person (other than Key or any of its
Subsidiaries) under Treas. Reg. 1.1502-6 (or any similar provision of local,
state or foreign law), as a transferee or successor, by contract or
otherwise.
(i) Key
has
not distributed stock of another Person, or has had its stock distributed by
another Person, in a transaction that was purported or intended to be governed
in whole or in part by Sections 355 or 361 of the Code.
3.13 Brokers.
Except
as set forth on Schedule
3.13,
Key has
not incurred, nor will it incur, directly or indirectly, any liability for
brokerage or finders’ fees or agent’s commissions or
any
similar charges in connection with this Agreement or any transaction
contemplated hereby.
3.14 Agreements,
Contracts and Commitments.
(a) Except
as
set forth in the Key SEC Reports filed prior to the date of this Agreement,
there are no contracts, agreements, leases, mortgages, indentures, notes, bonds,
liens, licenses, permits, franchises, purchase orders, sales orders or other
understandings, commitments or obligations (including without limitation
outstanding offers or proposals) of any kind, whether written or oral, to which
Key is a party or by or to which any of the properties or assets of Key may
be
bound, subject or affected, which either (i) creates or imposes a liability
greater than $25,000, or (ii) may not be cancelled by Key on less than 30 days’
or less prior notice (“Key
Contracts”).
All
Key Contracts are set forth in Schedule
3.14
other
than those that are exhibits to the Key SEC Reports.
(b) Each
Key
Contract was entered into at arms’ length and in the ordinary course, is in full
force and effect and is valid and binding upon and
enforceable against each of the parties thereto. True, correct and complete
copies of all Key
Contracts
(or written summaries in the case of oral Key
Contracts)
and of all outstanding offers or proposals of Key
have
been
heretofore delivered to the Company.
(c) Neither
Key nor, to the Knowledge of Key, any other party thereto is in breach of or
in
default under, and no event has occurred which with notice or lapse of time
or
both would become a breach of or default under, any Key Contract, and no party
to any Key Contract has given any written notice of any claim of any such
breach, default or event, which, individually or in the aggregate, are
reasonably likely to have a Material Adverse Effect on Key. Each agreement,
contract or commitment to which Key is a party or by which it is bound that
has
not expired by its terms is in full force
and
effect, except where such failure to be in full force and effect is not
reasonably likely to have a Material Adverse Effect on Key.
39
3.15 Insurance.
Except
for directors’ and officers’ liability insurance, Key does not maintain any
insurance policies.
3.16 Interested
Party Transactions.
Except
as set forth in the Key SEC Reports filed prior to the date of this Agreement,
no employee, officer, director or stockholder of Key or a member of his or
her
immediate family is indebted to Key nor is Key indebted (or committed to make
loans or extend or guarantee credit) to any of them, other than reimbursement
for reasonable expenses incurred on behalf of Key. To Key’s knowledge, none of
such individuals has any direct or indirect ownership interest in any Person
with whom Key is affiliated or with whom Key has a material contractual
relationship, or any Person that competes with Key, except that each employee,
stockholder, officer or director of Key and members of their respective
immediate families may own less than 5% of the outstanding stock in publicly
traded companies that may compete with Key. To Key’s knowledge, no officer,
director or stockholder or any member of their immediate families is, directly
or indirectly, interested in any material contract with Key (other than such
contracts as relate to any such individual ownership of capital stock or other
securities of Key).
3.17 Indebtedness.
Key has
no indebtedness for borrowed money.
3.18 Over-the-Counter
Bulletin Board Quotation.
Key
Common Stock is quoted on the Over-the-Counter Bulletin Board (“OTC
BB”).
There
is no action or proceeding pending or, to Key’s Knowledge, threatened against
Key by NASDAQ or NASD, Inc. (“NASD”)
with
respect to any intention by such entities to prohibit or terminate the quotation
of Key Common Stock on the OTC BB.
3.19 Board
Approval.
The
board
of
directors
of Key
(including any required committee or subgroup of the board
of
directors
of Key)
has, as of the date of this Agreement, unanimously (i) declared the advisability
of the Mergers and approved this Agreement and the transactions contemplated
hereby, (ii) determined that the Mergers are in the best interests of the
stockholders of Key, and (iii) determined that the fair market value of the
Company is equal to at least 80% of Key’s net assets.
3.20 Trust
Fund.
As of
the date hereof and at the Closing Date, Key has and will have no less than
$48,700,000 invested in United States Government securities or in money market
funds meeting certain conditions under Rule 2a-7 promulgated under the
Investment Company Act of 1940 in a trust account administered by Continental
Stock Transfer and Trust Company (the “Trust
Fund”),
less
such amounts, if any, as Key is required to pay to stockholders who elect to
have their shares converted to cash in accordance with the provisions of Key’s
Charter Documents.
40
3.21 Governmental
Filings.
Except
as set forth in Schedule
3.21,
Key has
been granted and holds, and has made, all filings necessary with Governmental
Entities to
the
conduct by Key
of
its
business (as presently conducted) or used or held for use by Key,
and
true, complete and correct copies of which have heretofore been delivered to
the
Company. Each such filing is in full force and effect and will not expire prior
to December 31, 2007, and Key
is
in compliance
with all of its obligations with respect thereto. No event has occurred and
is
continuing which requires or permits, or after notice or lapse of time or both
would require or permit, and consummation of the transactions contemplated
by
this Agreement or any ancillary documents will not require or permit (with
or
without notice or lapse of time, or both), any modification or termination
of
any such filings except such events which, either individually or in the
aggregate, would not have a Material Adverse Effect upon Key.
3.22 ▇▇▇▇▇▇▇▇-▇▇▇▇▇;
Internal Accounting Controls.
Key is
in material compliance with all provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002
which are applicable to it as of the Closing Date. Key’s
certifying officers have evaluated the effectiveness of Key’s
disclosure controls and procedures as of the end of the period covered by
Key’s
most
recently filed periodic report under the Exchange Act (such date, the
“Evaluation
Date”).
Key
presented
in its most recently filed periodic report under the Exchange Act the
conclusions of the certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the Evaluation
Date.
3.23 Private
Placement.
Assuming the accuracy of the Members’ representations and warranties set forth
in Section 1.15, no registration under the Securities Act is required for the
offer and sale of the Parent Common Stock by Key to the Members as contemplated
hereby. The issuance and sale of the Parent Common Stock hereunder does not
contravene the rules and regulations of the OTC BB.
3.24 Investment
Company.
Key is
not, and is not an Affiliate of, and immediately after receipt of payment for
the Parent Common Stock, will not be or be an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as
amended.
3.25 Listing
and Maintenance Requirements.
Key’s
Common Stock is registered pursuant to Section 15(d) of the Exchange Act, and
Key has taken no action designed to, or which is likely to have the effect
of,
terminating the registration of the Common Stock under the Exchange Act nor
has
Key received any notification that the SEC is contemplating terminating such
registration. Key has not, in the 12 months preceding the date hereof, received
notice from the OTC BB to the effect that Key is not in compliance with the
listing or maintenance requirements of the OTC BB. Key is, and has no reason
to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements.
3.26 Application
of Takeover Protections.
Key and
its board
of
directors
have
taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under Key’s
Certificate of Incorporation (or similar charter documents) or the laws of
its
state of incorporation that is or could become applicable to the Members as
a
result of the Mergers, including without limitation as a result of Key’s
issuance of Parent Common Stock and the Members’ ownership of the Parent Common
Stock.
41
3.27 No
Integrated Offering.
Assuming the accuracy of the Members’ representations and warranties set forth
in Section 1.15, neither Key, nor any of its affiliates, nor any Person acting
on its or their behalf has, directly or indirectly, made any offers or sales
of
any security or solicited any offers to buy any security, under circumstances
that would cause this offering of the Parent Common Stock to be integrated
with
prior offerings by Key for purposes of the Securities Act or any applicable
shareholder approval provisions of the OTC BB on which any of the securities
of
Key are listed or designated.
3.28 Manipulation
of Price.
Key has not, and to its Knowledge no one acting on its behalf has, (i) taken,
directly or indirectly, any action designed to cause or to result in the
stabilization or manipulation of the price of any security of Key to facilitate
the sale or resale of any of its Common Stock, (ii) sold, bid for, purchased,
or
paid any compensation for soliciting purchases of, any of the securities of
Key,
or (iii) paid or agreed to pay to any person any compensation for soliciting
another to purchase any other securities of Key.
3.29 Representations
and Warranties Complete.
The
representations and warranties of Key included in this Agreement, as modified
by
the Key Schedules, are true and complete in all material respects and do not
contain any untrue statement of a material fact or omit to state a material
fact
required to be stated therein or necessary to make the statements contained
therein not misleading, under the circumstance under which they were made.
Except for the representations and warranties made by Key and the Merger Sub
in
this Agreement, neither Key nor any other Person makes any representation or
warranty with respect to Key or the Merger Sub or their respective business,
operations, assets, liabilities, condition (financial or otherwise) or
prospects, notwithstanding the delivery or disclosure to the Company or any
of
its Affiliates or representatives of any documentation, forecasts, projections
or other information with respect to any one or more of the
foregoing.
3.30 Survival
of Representations and Warranties.
The
representations and warranties of Key set forth in this Agreement shall not
survive the Closing.
ARTICLE
IV
CONDUCT
PRIOR TO THE EFFECTIVE TIME
4.1 Conduct
of Business by Company and Key.
During
the period from the date of this Agreement and continuing until the earlier
of
the termination of this Agreement pursuant to its terms or the Closing, each
of
the Company (including its Subsidiaries), Key, Parent and each Merger Sub shall,
except to the extent that the other party (either the Company or Key, as
applicable) shall otherwise consent in writing, which consent shall not be
unreasonably withheld, carry on its business in the usual, regular and ordinary
course consistent with past practices, in substantially the same manner as
heretofore conducted and in compliance with all applicable laws and regulations
(except where noncompliance would not have a Company Material Adverse Effect
or
a Project Material Adverse Effect), pay its debts and taxes when due subject
to
good faith disputes over such debts or taxes, pay or perform other material
obligations when due, and use its commercially reasonable efforts consistent
with past practices and policies to (A) preserve substantially intact its
present business organization, (B) keep available the services of its present
officers and employees and (C) preserve its relationships with customers,
suppliers, distributors, licensors, licensees, and others with which it has
significant business dealings. Unless otherwise noted, all references to the
Company and its Subsidiaries in this Article IV shall mean the Company on an
as
reorganized basis as such reorganization is set forth on Schedule
2.2(a)
hereto.
In addition, except as required or permitted by the terms of this Agreement
or
set forth in Schedule
4.1
hereto,
without the prior written consent of the other party, which consent shall not
be
unreasonably withheld, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant
to
its terms or the Closing, each of the Company, Key, Parent and each Merger
Sub
shall not do any of the following:
42
(a) Waive
any
stock repurchase or similar rights, accelerate, amend or (except as specifically
provided for herein) change the period of exercisability of options
or restricted stock, or reprice options granted under any employee, consultant,
director or other stock (or similar) plans or authorize cash payments in
exchange for any options granted under any of such plans;
(b) Grant
any
severance or termination pay to any officer or employee except pursuant to
applicable law, written agreements outstanding, or policies
existing on the date hereof and as previously or concurrently disclosed in
writing or made available to the other party, or adopt any new severance plan,
or amend or modify or alter in any manner any severance plan, agreement or
arrangement existing on the date hereof;
(c) Transfer
or license to any person or otherwise extend, amend or modify any material
rights to any Intellectual Property of the Company (or its Subsidiaries) or
Key,
as
applicable, or enter into grants to transfer or license to any person future
patent rights, other than in the ordinary course of business consistent with
past practices provided that in no event shall the Company or Key
license
on an exclusive basis or sell any Intellectual Property of the Company
(or
its
Subsidiaries),
or
Key
as
applicable;
(d) Declare,
set aside or pay any dividends on or make any other distributions (whether
in
cash, stock, equity securities or property) in respect of any capital stock
or
split, combine or reclassify any capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for any capital stock except, after notice to Parent, for: (i) distributions
made to the Members for payment of taxes with respect to income of the Company
(or its Subsidiaries), which shall include reserves for the payment of taxes
due
after Closing with respect to income of the Company earned prior to Closing
subject to post-Closing adjustments based on actual tax liability incurred;
and
(ii) distributions of $20,000,000 to pay back loans from Members;
(e) Purchase,
redeem or otherwise acquire, directly or indirectly, any shares of capital
stock
or membership interests, as applicable, of the Company (or its Subsidiaries)
and
Key, as applicable, including repurchases
of unvested shares or membership interests, as applicable, at cost in connection
with the termination of the relationship with any employee or consultant
pursuant to stock or purchase agreements in effect on the date
hereof;
43
(f) Issue,
deliver, sell, authorize, pledge or otherwise encumber, or agree to any of
the
foregoing with respect to, any shares of capital stock or
membership interests, as applicable, or any securities convertible into or
exchangeable for shares of capital stock or membership interests, as applicable,
or subscriptions, rights, warrants or options to acquire any shares of capital
stock or membership interests, as applicable, or any securities convertible
into
or exchangeable for shares of capital stock or membership interests, as
applicable, or enter into other agreements or commitments of any character
obligating it to issue any such shares or convertible or exchangeable
securities. In the event that the Company issues any membership or similar
ownership interests prior to Closing, the transferee will agree to be bound
by
the terms and conditions of this Agreement, such agreement to be in form and
substance reasonably satisfactory to Parent;
(g) Amend
its
Charter Documents unless required to do so hereunder;
(h) Acquire
or agree to acquire by merging or consolidating with, or by purchasing any
equity interest in or a portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire
any
assets which are material, individually or in the aggregate, to the business
of
Key or the Company (or any of its Subsidiaries) as applicable, or enter into
any
joint ventures, strategic partnerships or alliances or other arrangements that
provide for exclusivity of territory or otherwise restrict such party’s ability
to compete or to offer or sell any products or services except as otherwise
contemplated by this Agreement;
(i) Sell,
lease, license, encumber or otherwise dispose of any properties or assets,
except (A) sales of individual condominium units in the ordinary course of
business consistent with past practice at fair market value to unaffiliated
purchasers who, together with their affiliates, are not purchasing more than
an
aggregate of ten units in any individual project; and (B) and the sale, lease
or
disposition (other than through licensing) of property or assets that are not
material, individually or in the aggregate, to the business of such
party;
(j) Incur
any
indebtedness for borrowed money in excess of $1,000,000 in the aggregate (other
than purchase money debt in connection with the acquisition by the Company
of
vehicles, office equipment and operating equipment not exceeding $1,000,000
in
the aggregate) or in connection with the purchase of real property (including
any personal property directly or indirectly related to such real property)
or
guarantee any such indebtedness of another person, issue or sell any debt
securities or options, warrants, calls or other rights to acquire any debt
securities of Key or the Company (or its Subsidiaries), as applicable, enter
into any “keep well” or other agreement to maintain any financial statement
condition or enter into any arrangement having the economic effect of any of
the
foregoing; provided that notwithstanding
the foregoing, the Company may without Key’s
consent
(i)
obtain a line of credit of up to $100,000,000 with a commercial bank on
customary terms, and (ii) enter into the Bridge Loan as described on
Schedule
6.2(n)
hereto;
(k) Adopt
or
amend any employee compensation or benefit plan, policy or arrangement, any
employee stock or membership interest purchase or employee stock or membership
interest option plan, or enter into any employment contract or collective
bargaining agreement (other than offer letters and letter agreements entered
into in the ordinary course of business consistent with past practice with
employees who are terminable “at will”), grant or pay any special bonus or
special remuneration to any director or employee, or increase the salaries
or
wage rates or fringe benefits (including rights to severance or indemnification)
of its directors, officers, employees or consultants, except in the ordinary
course of business consistent with past practices and as otherwise contemplated
by this Agreement;
44
(l) Except
in
the ordinary course of business consistent with past practices, pay, discharge,
settle or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), or litigation (whether or
not
commenced prior to the date of this Agreement) other than the payment,
discharge, settlement or satisfaction, in the ordinary course of business
consistent with past practices or in accordance with their terms, or liabilities
recognized or disclosed in the Unaudited Financial Statements or in the most
recent financial statements included in the Key SEC Reports filed prior to
the
date of this Agreement, as applicable, or incurred since the date of such
financial statements, or waive the benefits of, agree to modify in any manner,
terminate, release any person from or knowingly fail to enforce any
confidentiality or similar agreement to which the Company (or its Subsidiaries)
is a party or of which the Company (or its Subsidiaries) is a beneficiary or
to
which Key is a party or of which Key is a beneficiary, as
applicable;
(m) Except
in
the ordinary course of business consistent with past practices, modify, amend
or
terminate any Material Company Contract or Key Contract,
as applicable, or waive, delay the exercise of, release or assign any material
rights or claims thereunder;
(n) Except
as
required by U.S. GAAP, revalue any of its assets or make any change in
accounting methods, principles or practices;
(o) Except
in
the ordinary course of business consistent with past practices or as set forth
below in this Section 4.1(o), incur or enter into any agreement, contract or
commitment requiring
such party to pay in excess of $1,000,000 in any 12 month period, other than
the
Company under a Routine Operating Contract; provided, that, notwithstanding
the
foregoing the Company may (i) without Key’s
consent
enter
into any agreement, contract or commitment requiring
such party to pay in excess of $2,000,000 in any 12 month period if such
agreement provides for a refundable deposit in favor of the Company and the
Company provides written notice to Key
of
the
material terms and conditions of such agreement, contract or commitment within
one week after such agreement, contract or commitment becomes effective, (ii)
without Key’s
consent
enter
into any agreement, contract or commitment requiring
such party to pay in excess of $2,000,000 in any 12 month period if such
agreement provides for a refundable deposit in favor of the Company and the
Company provides prior written notice to Key
of
the
material terms and conditions of such agreement, contract or commitment, (iii)
without Key’s
consent
enter
into any agreement, contract or commitment requiring
such party to pay up to $1,000,000 in any 12 month period if such agreement
provides for a non-refundable deposit payable by the Company and the Company
provides written notice to Key
of
the
material terms and conditions of such agreement, contract or commitment within
one week after such agreement, contract or commitment becomes effective, (iv)
with prior written consent of Key
consent
enter
into any agreement, contract or commitment requiring
such party to pay in excess of $1,000,000 in any 12 month period if such
agreement provides for a non-refundable deposit payable by the Company, or
(v)
without Key’s
consent, enter into an agreement with an Optioned Property Provider that does
not create any liability to the Company in excess of $1,000,000 provided that
the Company notifies Key
of
such
agreement within five business days of the date of entering into such agreement.
45
(p)
Take any
action that (without regard to any action taken, or agreed to be taken, by
Key
or any of its Affiliates) could prevent the transactions contemplated by this
Agreement from qualifying as a tax-free contribution within the meaning of
Section 351(a) of the Code;
(q) Make
or
rescind any Tax elections that, individually or in the aggregate, could be
reasonably likely to adversely affect in any material respect the Tax liability
or Tax attributes of such party, settle or compromise any material income tax
liability or, except as required by applicable law, materially change any method
of accounting for Tax purposes or prepare or file any Return in a manner
inconsistent with past practice;
(r) Form,
establish or acquire any Subsidiary except as contemplated by this Agreement;
(s) Permit
any Person to exercise any of its discretionary rights under any Plan to provide
for the automatic acceleration of any outstanding options,
the termination of any outstanding repurchase rights or the termination of
any
cancellation rights issued pursuant to such plans;
(t) Make
capital expenditures except in accordance with prudent business and operational
practices consistent with prior practice;
(u) Take
or
omit to take any action, the taking or omission of which would be reasonably
anticipated to have a Material Adverse Effect;
(v) Enter
into any transaction with or distribute or advance any assets or property to
any
of its officers, directors, partners, stockholders or other affiliates (other
than payment of salary and benefits in the ordinary course of business
consistent with past practice); or
(w) Amend,
modify, waive, terminate or otherwise change any of the terms or conditions
of
the Optioned Property Agreement; or
(x) Agree
in
writing or otherwise agree, commit or resolve to take any of the actions
described in Section 4.1 (a) through (v) above.
In
the
event that Key does not consent to any action proposed to be taken by the
Company pursuant to this Section 4.1, nothing shall prevent the Members from
taking such action by the way of another entity or individually.
46
ARTICLE
V
ADDITIONAL
AGREEMENTS
5.1 Proxy
Statement; Key Stockholders’ Meeting.
(a) As
soon as practicable after receipt by Key from the Company of all financial
and
other information relating to the Company as Key may reasonably request for
its
preparation, the execution of this Agreement, Key shall prepare and file with
the SEC under the Exchange Act, and with all other applicable regulatory bodies,
proxy materials for the purpose of soliciting proxies from holders of Key Common
Stock to vote in favor of: (i) the adoption of this Agreement and the approval
of the Merger (“Key
Stockholder Approval”)
and
(ii) the adoption of a Stock Incentive Plan in a form reasonably acceptable
to
Key and the Company (the “Key
Plan”),
at a
meeting of holders of Key Common Stock to be called and held for such purpose
(the “Key
Stockholders’ Meeting”).
The
Key Plan shall provide that an aggregate of 3,000,000 shares of Common Stock
shall be reserved for issuance pursuant to the Key Plan. Such proxy materials
shall be in the form of the Proxy Statement to be used for the purpose of
soliciting such proxies from holders of Key Common Stock and the Proxy Statement
shall comply in all material respects with all applicable requirements of law
and the rules and regulations promulgated thereunder. The Company shall furnish
to Key all information concerning the Company as Key may reasonably request
in
connection with the preparation of the Proxy Statement. Each of Key and the
Company will notify the other promptly upon the receipt of any comments from
the
SEC or its staff and of any request by the SEC or its staff or any other
governmental officials for amendments or supplements to the Proxy Statement
and
it will supply the other with copies of all correspondence between the SEC
or
its staff or other governmental officials with respect to the Proxy Statement
or
the Mergers. The Company and its counsel shall be given an opportunity to review
and comment on the Proxy Statement prior to its filing with the SEC. Key, with
the assistance of the Company, shall promptly respond to any SEC comments on
the
Proxy Statement and shall otherwise use reasonable best efforts to cause the
Proxy Statement to be approved for issuance by the SEC as promptly as
practicable. Key shall also take any and all such actions to satisfy the
requirements of the Securities Act and the Exchange Act. Prior to the Closing
Date, Key shall use its reasonable best efforts to cause the shares of Key
Common Stock to be issued pursuant to the Mergers to be registered or qualified
under all applicable Blue Sky Laws of each of the states and territories of
the
United States in which it is believed, based on information furnished by the
Company, holders of the Company membership interests reside and to take any
other such actions that may be necessary to enable the Key Common Stock
Interests to be issued pursuant to the Mergers in each such
jurisdiction.
(b) As
soon
as practicable following its approval by the SEC, Key shall distribute the
Proxy
Statement to the holders of Key Common Stock and, pursuant thereto, shall call
the Key Stockholders’ Meeting in accordance with the DGCL and, subject to the
other provisions of this Agreement, solicit proxies from such holders to vote
in
favor of the adoption of this Agreement and the approval of the Mergers and
other matters presented to the stockholders of Key for approval or adoption
at
the Key Stockholders’ Meeting, including, without limitation, the matters
described in Section 5.1(a).
47
(c) Key
shall
comply with all applicable provisions of and rules under the Exchange Act and
all applicable provisions of the DGCL in the preparation, filing and
distribution of the Proxy Statement, the solicitation of proxies thereunder,
and
the calling and holding of the Key Stockholders’ Meeting. Without limiting the
foregoing, Key shall ensure that the Proxy Statement does not, as of the date
on
which it is distributed to the holders of Key Common Stock, and as of the date
of the Key Stockholders’ Meeting, contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
made, in light of the circumstances under which they were made, not misleading
(provided that Key shall not be responsible for the accuracy or completeness
of
any information relating to the Company or any other information furnished
by
the Company for inclusion in the Proxy Statement). The Company represents and
warrants that the information relating to the Company supplied by the Company
for inclusion in the Proxy Statement will not as of the date of its distribution
to the holders of Key Common Stock (or any amendment or supplement thereto)
or
at the time of the Key Stockholders’ Meeting contain any statement which, at
such time and in light of the circumstances under which it is made, is false
or
misleading with respect to any material fact, or omits to state any material
fact required to be stated therein or necessary in order to make the statement
therein not false or misleading.
(d) Key,
acting through its board of directors, shall include in the Proxy Statement
the
recommendation of its board of directors that the holders
of Key
Common
Stock vote in favor of the
adoption of this Agreement and the approval of the Mergers and the other matters
presented to the stockholders of Key for approval or adoption at the Key
Stockholders’ Meeting, including, without limitation, the matters described in
Section 5.1(a), and
shall
otherwise use reasonable best efforts to obtain the Key
Stockholder
Approval.
5.2 Directors
and Officers of Key and the Surviving Entities.
(a) From
and
after the Effective Time, until successors are duly elected or appointed and
qualified in accordance with applicable law, (a) the board of directors of
Key
Merger Sub at the Effective Time shall be the board of directors of the Cay
Surviving Entity and (b) the officers of the Company at the Effective Time
shall
be the officers of the Cay Surviving Entity. From and after the Initial
Effective Time, until successors are duly elected or appointed and qualified
in
accordance with applicable law, (a) the directors of Key Merger Sub at the
Initial Effective Time shall be the directors of the Key Surviving Entity and
(b) the officers of Key at the Initial Effective Time shall be the officers
of
the Key Surviving Entity. Until successors are duly elected or appointed and
qualified in accordance with applicable law, (a) the board of directors of
Key
immediately before the Initial Effective Time shall be the board of directors
of
Parent immediately after the Effective Time and (b) the officers of Key
immediately before the Initial Effective Time shall be the officers of Parent
immediately after the Effective Time.
(b) Notwithstanding
the provisions of Section 5.2(a) hereof, Key and the Company shall take all
necessary action so that the board
of
directors
of Key
immediately before the Initial Effective Time and of Parent immediately after
the Effective Time shall consist of two members
designated by Key, two members designated by the Company and between one and
five independent members designated by the Members, and that the persons listed
on Schedule
5.2
are
appointed to the positions of officers of Key and the Key Surviving Entity
immediately before the Initial Effective Time, and Parent immediately after
the
Effective Time, as set forth therein, to serve in such positions effective
immediately after the Closing. The Members, on one hand, and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
and ▇▇▇ ▇▇▇▇▇▇▇▇ of Key, on the other hand, shall enter into a voting agreement
pursuant to which (i) they agree to vote for the other’s designees to the board
of directors of Key and the Parent, as applicable, through the annual meeting
of
the stockholders of Key to be held in 2010 and (ii) they agree to vote for
one
designee of Key and the Parent, as applicable, to be determined by ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇▇, to the board of directors of Parent through the
annual meeting of the stockholders of Parent to be held in 2012.
48
5.3 HSR
Act.
If
required pursuant to the HSR Act, as promptly as practicable after the date
of
this Agreement, Key and the Company shall each prepare and file the notification
required of it thereunder in connection with the transactions contemplated
by
this Agreement and shall promptly and in good faith respond to all information
requested of it by the Federal Trade Commission and Department of Justice in
connection with such notification and otherwise cooperate in good faith with
each other and such Governmental Entities. Key and the Company shall (a)
promptly inform the other of any communication to or from the Federal Trade
Commission, the Department of Justice or any other Governmental Entity regarding
the transactions contemplated by this Agreement, (b) give the other prompt
notice of the commencement of any action, suit, litigation, arbitration,
proceeding or investigation by or before any Governmental Entity with respect
to
such transactions, and (c) keep the other reasonably informed as to the status
of any such action, suit, litigation, arbitration, proceeding or investigation.
Filing fees with respect to the notifications required under the HSR Act shall
be shared equally by Key and the Company.
5.4 Other
Actions.
(a) Key
shall continue to file all reports required to be filed by the SEC in a timely
manner which (i) will be prepared in accordance and comply in all material
respects with the requirements of the Securities Act or the Exchange Act, as
the
case may be, and the rules and regulations of the SEC thereunder applicable
to
such Key SEC Reports, and (ii) will not at the time they are filed (and if
amended or superseded by a filing prior to the date of this Agreement then
on
the date of such filing or as so amended or superseded) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of
the circumstances under which they were made, not misleading. Except to the
extent set forth in the preceding sentence, Key makes no representation or
warranty whatsoever concerning the Key SEC Reports as of any time other than
the
time they were filed. At least five (5) days prior to Closing, Key shall prepare
a draft Form 8-K announcing the Closing, together with, or incorporating by
reference, the financial statements prepared by the Company and its accountant,
and such other information that may be required to be disclosed with respect
to
the Mergers in any report or form to be filed with the SEC (“Merger
Form 8-K”),
which
shall be in a form reasonably acceptable to the Company and in a format
acceptable for ▇▇▇▇▇ filing. Prior to Closing, Key and the Company shall prepare
the press release announcing the consummation of the Mergers hereunder
(“Press
Release”).
Simultaneously with the Closing, Key shall file the Merger Form 8-K with the
SEC
and distribute the Press Release.
(b) The
Company and Key shall further cooperate with each other and use their respective
reasonable best efforts to take or cause to be taken all
actions, and do or cause to be done all things, necessary, proper or advisable
on its part under this Agreement and applicable laws to consummate the
Mergers
and the
other transactions contemplated hereby as soon as practicable, including
preparing and filing as soon as practicable all documentation to effect all
necessary notices, reports and other filings and to obtain as soon as
practicable all consents, registrations, approvals, permits and authorizations
necessary or advisable to be obtained from any third party (including the
respective independent accountants of the Company and Key)
and/or
any Governmental Entity in order to consummate the Mergers
or any
of the other transactions contemplated hereby. This obligation shall include,
on
the part of Key,
sending
a termination letter to Continental in substantially the form of Exhibit
A
attached
to the Investment Management Trust Agreement by and between Key
and
Continental. Subject to applicable laws relating to the exchange of information
and the preservation of any applicable attorney-client privilege, work-product
doctrine, self-audit privilege or other similar privilege, each of the Company
and Key
shall
have the right to review and comment on in advance, and to the extent
practicable each will consult the other on, all the information relating to
such
party that appears in any filing made with, or written materials submitted
to,
any third party and/or any Governmental Entity in connection with the
Mergers
and the
other transactions contemplated hereby. In exercising the foregoing right,
each
of the Company and Key
shall
act
reasonably and as promptly as practicable.
49
5.5 Required
Information.
In
connection with the preparation of the Merger Form 8-K and Press Release, and
for such other reasonable purposes, the Company and
Key
each
shall, upon request by the other, furnish the other with all information
concerning themselves, their respective directors, officers and stockholders
(including the directors of Key
and
the
Company to be elected effective as of the Closing pursuant to Section 5.2
hereof) and such other matters as may be reasonably necessary or advisable
in
connection with the Mergers,
or any
other statement, filing, notice or application made by or on behalf of the
Company and Key
to
any
third party and/or any Governmental Entity in connection with the Mergers
and the
other transactions contemplated hereby. Each party warrants and represents
to
the other party that all such information shall be true and correct in all
material respects and will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to
make the statements contained therein, in light of the circumstances under
which
they were made, not misleading.
5.6 Confidentiality;
Access to Information.
(a) Confidentiality.
Any
confidentiality agreement previously executed by the parties shall be superseded
in its entirety by the provisions of this Agreement. Each party agrees to
maintain in confidence any non-public information received from the other party,
and to use such non-public information only for purposes of consummating the
transactions contemplated by this Agreement. Such confidentiality obligations
will not apply to (i) information which was known to the one party or their
respective agents prior to receipt from the other party; (ii) information which
is or becomes generally known; (iii) information acquired by a party or their
respective agents from a third party who was not bound to an obligation of
confidentiality; and (iv) disclosure required by law. In the event this
Agreement is terminated as provided in Article VIII hereof, each party (x)
will
return or cause to be returned to the other all documents and other material
obtained from the other in connection with the Mergers contemplated hereby,
and
(y) will use its reasonable best efforts to delete from its computer systems
all
documents and other material obtained from the other in connection with the
Mergers contemplated hereby.
50
(b) Access
to Information.
(i)
Company will afford Key and its financial advisors, accountants, counsel and
other representatives reasonable access during normal business hours, upon
reasonable notice, to the properties, books, records and personnel of the
Company during the period
prior to the Closing to obtain all information concerning the business,
including the status of product development efforts, properties, results of
operations and personnel of the Company, as Key
may
reasonably request. No information or knowledge obtained by Key
in
any
investigation pursuant to this Section 5.6 will affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Mergers.
(ii) Key
will
afford the Company and its financial advisors, underwriters, accountants,
counsel and other representatives reasonable access during normal business
hours, upon reasonable notice, to the properties, books, records and personnel
of Key during the period prior to the Closing to obtain all information
concerning the business, including the status of product development efforts,
properties, results of operations and personnel of Parent and Key, as the
Company may reasonably request.
No
information or knowledge obtained by Parent
and Key in
any
investigation pursuant to this Section 5.6 will affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Mergers.
(iii) Notwithstanding
anything to the contrary contained herein, each party (“Subject
Party”)
hereby
agrees that by proceeding with the Closing,
it shall be conclusively deemed to have waived for all purposes hereunder any
inaccuracy of representation or breach of warranty by another party which is
actually known by the Subject Party prior to the Closing.
5.7 Charter
Protections; Directors’ and Officers’ Liability Insurance.
(a) All
rights to indemnification for acts or omissions occurring through the Closing
Date now existing in favor of the current directors and officers
of Parent
as
provided in the Charter Documents of Parent
or
in any
indemnification agreements shall survive the Mergers
and
shall continue in full force and effect in accordance with their
terms.
(b) For
a
period of six (6) years after the Closing Date, Parent shall cause to be
maintained in effect the current policies of directors’ and officers’
liability insurance maintained by Parent
(or
policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous) with respect to claims arising from
facts and events that occurred prior to the Closing Date.
(c) If
Parent
or any of its successors or assigns (i) consolidates with or merges into any
other Person and shall not be the continuing or surviving
entity of such consolidation or merger, or (ii) transfers or conveys all or
substantially all of its properties and assets to any Person, then, in each
such
case, to the extent necessary, proper provisions shall be made so that the
successors and assigns of Parent
assume
the obligations set forth in this Section 5.7.
(d) The
provisions of this Section 5.7 are intended to be for the benefit of, and shall
be enforceable by, each Person who will have been a director
or officer of Parent
or
Key for
all
periods ending on or before the Closing Date and may not be changed without
the
consent of Committee referred to in Section 1.16.
51
5.8 Public
Disclosure.
From
the date of this Agreement until Closing or termination, the parties shall
cooperate in good faith to jointly prepare all press
releases and public announcements pertaining to this Agreement and the
transactions governed by it, and no party shall issue or otherwise make any
public announcement or communication pertaining to this Agreement or the
transaction without the prior consent of
Key
(in
the
case of the Company and the Members) or the Company (in the case of Key),
except
as required by any legal requirement or by the rules and regulations of, or
pursuant to any agreement of a stock exchange or trading system. Each party
will
not unreasonably withhold approval from the others with respect to any press
release or public announcement. If any party determines with the advice of
counsel that it is required to make this Agreement and the terms of the
transaction public or otherwise issue a press release or make public disclosure
with respect thereto, it shall, at a reasonable time before making any public
disclosure, consult with the other party regarding such disclosure, seek such
confidential treatment for such terms or portions of this Agreement or the
transaction as may be reasonably requested by the other party and disclose
only
such information as is legally compelled to be disclosed. This provision will
not apply to communications by any party to its counsel, accountants and other
professional advisors. Notwithstanding the foregoing, the parties hereto agree
that promptly as practicable after the execution of this Agreement, Key
will
file
with the SEC a Current Report on Form 8-K pursuant to the Exchange Act to report
the execution of this Agreement, with respect to which Key
shall
consult with the Company. Key
shall
provide to Company for review and comment a draft of the Current Report on
Form
8-K prior to filing with the SEC; provided that unless objected to by the
Company by written notice given to Key
within
two (2) days after delivery to the Company specifying the language to which
reasonable objection is taken, any language included in such Current Report
shall be deemed to have been approved by the Company and may be filed with
the
SEC and used in other filings made by Key
with
the
SEC.
5.9 Reasonable
Efforts.
Upon
the terms and subject to the conditions set forth in this Agreement, each of
the
parties agrees to use its commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to
be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Mergers
and the
other transactions contemplated by this Agreement, including using commercially
reasonable efforts to accomplish the following: (i) the taking of all reasonable
acts necessary to cause the conditions precedent set forth in Article VI to
be
satisfied, (ii) the obtaining of all necessary actions, waivers, consents,
approvals, orders and authorizations from Governmental Entities and the making
of all necessary registrations, declarations and filings (including
registrations, declarations and filings with Governmental Entities, if any)
and
the taking of all reasonable steps as may be necessary to avoid any suit, claim,
action, investigation or proceeding by any Governmental Entity, (iii) the
obtaining of all consents, approvals or waivers from third parties required
as a
result of the transactions contemplated in this Agreement, (iv) the defending
of
any suits, claims, actions, investigations or proceedings, whether judicial
or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (v) the execution or delivery of any additional
instruments reasonably necessary to consummate the transactions contemplated
by,
and to fully carry out the purposes of, this Agreement. In connection with
and
without limiting the foregoing, Key
and
its
board of directors and the Company and its board of directors shall, if any
state takeover statute or similar statute or regulation is or becomes applicable
to the Mergers,
this
Agreement or any of the transactions contemplated by this Agreement, use its
commercially reasonable efforts to enable the Mergers
and the
other transactions contemplated by this Agreement to be consummated as promptly
as practicable on the terms contemplated by this Agreement. Notwithstanding
anything herein to the contrary, nothing in this Agreement shall be deemed
to
require Key
or
the
Company to agree to any divestiture by itself or any of its affiliates of shares
of capital stock or of any business, assets or property, or the imposition
of
any material limitation on the ability of any of them to conduct their business
or to own or exercise control of such assets, properties and stock.
52
5.10 Treatment
as a Reorganization.
(a) The
Company shall not take, and shall use its best efforts not to permit any
Affiliate of the Company to take, any actions that could impact the Members
to
fail to qualify for nonrecognition of gain or loss under Section 351(a) of
the
Code.
(b) Key
shall
not take, and shall use its best efforts not to permit any Affiliate, including
any employee, officer or director of Key to take, any actions that could impact
the Members to fail to qualify for nonrecognition of gain or loss under Section
351(a) of the Code.
(c) Key
shall
use its best efforts, and shall cause its Affiliates to use their best efforts,
to cause the Members to qualify for nonrecognition of gain or loss with respect
to the transactions contemplated by this Agreement pursuant to Section 351(a)
of
the Code.
(d) The
Company shall use its best efforts, and shall cause its Affiliates to use their
best efforts, to cause the Members to qualify for nonrecognition of gain or
loss
with respect to the transactions contemplated by this Agreement pursuant to
Section 351(a) of the Code.]
5.11 No
Parent Common Stock Transactions.
Each of
(a) ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, the ▇▇▇▇▇ Trust and ▇▇▇▇▇ ▇▇▇▇▇▇▇ (and
their
affiliates) shall agree that he, she or it shall not, prior to January 1, 2009,
and (b) all other Members of the Company (and their affiliates) shall agree
that
he, she or it shall not, prior to the day that is six (6) months after the
Closing, sell, transfer or otherwise dispose of an interest in any of the shares
of Parent Common Stock he, she or it receives as a result of the Mergers other
than as permitted pursuant to the Lock-Up Agreement in substantially the form
of
Exhibit
G
hereto
executed by such Person prior to the Closing Date. Notwithstanding the
foregoing, ▇▇▇▇ ▇▇▇▇▇ (and the ▇▇▇▇▇ Trust) and ▇▇▇▇▇ ▇▇▇▇▇▇▇ may pledge (or
engage in any hedging, straddling or other strategies with respect to) up to
a
maximum of 15,000,000 shares of Parent Common Stock to a financial institution
as collateral for personal loans and such exception to restrictions on transfer
will be set forth in their individual Lock-Up Agreements.
5.12 Certain
Claims.
As
additional consideration for the issuance of Parent Common Stock pursuant to
this Agreement, each of the Members hereby releases and forever discharges,
effective as of the Closing Date, the Company and its directors, officers,
employees and agents, from any and all rights, claims, demands, judgments,
obligations, liabilities and damages, whether accrued or unaccrued, asserted
or
unasserted, and whether known or unknown arising out of or resulting from such
Member’s (i) status as a holder of an equity interest in the Company; and (ii)
employment, service, consulting or other similar agreement entered into with
the
Company prior to Closing, to the extent that the bases for claims under any
such
agreement that survives the Closing arise prior to the Closing, provided,
however, the foregoing shall not release any obligations of Key or the Parent
set forth in this Agreement or the Escrow Agreement.
53
5.13 No
Securities Transactions.
Neither
the Company nor any Member or any of their affiliates, directly or indirectly,
shall engage in any transactions involving the securities of Key prior to the
time of the making of a public announcement of the transactions contemplated
by
this Agreement. The Company shall use its best efforts to require each of its
officers, directors, employees, agents and representatives to comply with the
foregoing requirement. Neither Key nor its officers or directors, nor any of
their respective affiliates, directly or indirectly, shall take any action
described in Section 3.28 prior to the Closing Date.
5.14 No
Claim Against Trust Fund.
The
Company and the Members acknowledge that, if the transactions contemplated
by
this Agreement are not consummated by Key by October 28, 2007, Key will be
obligated to return to its stockholders the amounts being held in the Trust
Fund. Accordingly, the Company and the Members hereby waive all rights against
Key to collect from the Trust Fund any monies that may be owed to them by Key
for any reason whatsoever, including but not limited to a breach of this
Agreement by Key or any negotiations, agreements or understandings with Key
(other than as a result of the Mergers, pursuant to which the Company would
have
the right to collect the monies in the Trust Fund), and will not seek recourse
against the Trust Fund for any reason whatsoever.
5.15 Disclosure
of Certain Matters.
Each of
Key and the Company will provide the other with prompt written notice of any
event, development or condition that (a) would cause any of such party’s
representations and warranties to become untrue or misleading or which may
affect its ability to consummate the transactions contemplated by this
Agreement, (b) had it existed or been known on the date hereof would have been
required to be disclosed under this Agreement, (c) gives such party any reason
to believe that any of the conditions set forth in Article VI will not be
satisfied, (d) is of a nature that is or may be materially adverse to the
operations, prospects or condition (financial or otherwise) of Key or the
Company, or (e) would require any amendment or supplement to the Proxy
Statement. The parties shall have the obligation to supplement or amend the
Company Schedules and Key Schedules (the “Disclosure
Schedules”)
being
delivered concurrently with the execution of this Agreement and annexed hereto
with respect to any matter hereafter arising or discovered after delivery hereof
which, if existing or known at the date of this Agreement, would have been
required to be set forth or described in the Disclosure Schedules. The
obligations of the parties to amend or supplement the Disclosure Schedules
being
delivered herewith shall terminate on the Closing Date. Notwithstanding any
such
amendment or supplementation, for purposes of Sections 6.2(a), 6.3(a),
7.1(a)(i), 8.1(d) and 8.1(e), the representations and warranties of the parties
shall be made with reference to the Disclosure Schedules as they exist at the
time of execution of this Agreement, subject to such anticipated changes as
are
set forth in Schedule
4.1
or
otherwise expressly contemplated by this Agreement or which are set forth in
the
Disclosure Schedules as they exist on the date of this Agreement.
54
5.16 No
Solicitation.
(a) Until
this Agreement is terminated pursuant to Section 8.1, the Company will not,
and
will cause its Affiliates, employees, agents and representatives not to,
directly or indirectly, solicit or enter into discussions or transactions with,
or encourage, or provide any information to, any corporation, partnership or
other entity or group (other than Key and its designees) concerning any merger,
sale of ownership interests and/or assets of the Company, recapitalization
or
similar transaction.
(b) Key
will
not, and will cause its employees, agents and representatives not to, directly
or indirectly, solicit or enter into discussions or transactions with, or
encourage, or provide any information to, any corporation, partnership or other
entity or group (other than the Company and its designees) concerning any
merger, purchase of ownership interests and/or assets, recapitalization or
similar transaction.
(c) The
Company shall promptly advise Key of the nature of any written offer, proposal
or indication of interest that is submitted to the Company and the identity
of
the Person making such written offer, proposal or indication of
interest.
5.17 Company
Actions.
(a) The
Company shall use its best efforts to take such actions as are necessary to
fulfill its obligations under this Agreement and to enable
Key,
Parent and
each
Merger Sub to fulfill its obligations hereunder.
(b) Key,
Parent and each Merger Sub shall use their best efforts to take such actions
as
are necessary to fulfill their obligations under this Agreement and to
enable
the Company to fulfill its obligations hereunder.
5.18 Short
Sales.
Key
covenants that it will not, nor will it instruct any officer or director to,
execute any Short Sales during the period commencing at the execution of this
Agreement and ending at the Closing Date. Each of ▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ shall agree to execute a commitment not to execute any Short Sale
as
provided in this Section 5.18. “Short
Sales”
shall
include all “short sales” as defined in Rule 200 of Regulation SHO under the
Exchange Act.
5.19 Integration.
Key
shall not sell, offer for sale or solicit offers to buy or otherwise negotiate
in respect of any security (as defined in Section 2 of the Securities Act)
that
would be integrated with the offer or sale of the Parent Common Stock as
contemplated pursuant to this Agreement in a manner that would require the
registration under the Securities Act of the sale of the Parent Common Stock
to
the Members as contemplated by this Agreement or that would be integrated with
the offer or sale of the Parent Common Stock.
55
ARTICLE
VI
CONDITIONS
TO THE MERGERS
6.1 Conditions
to Obligations of Each Party to Effect the Mergers.
The
respective obligations of each party to this Agreement to effect the Mergers
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) HSR
Act; No Order.
All
specified waiting periods, if any, under the HSR Act shall have expired and
no
Governmental Entity shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making either the Mergers
illegal
or otherwise prohibiting consummation of either of the Mergers,
substantially on the terms contemplated by this Agreement.
(b) Stockholder
Approval.
The Key
Stockholder Approval shall have been duly approved and adopted by the
stockholders of Key by the requisite vote under the laws of the State of
Delaware.
(c) Key
Common Stock.
Holders
of twenty percent (20%) or more of the shares of Key Common Stock issued in
Key’s initial public offering
of securities and outstanding immediately before the Closing shall not have
exercised their rights to convert their shares into a pro rata share of the
Trust Fund in accordance with Key’s
Charter Documents.
(d) Escrow
Agreement.
Parent,
Key, the Company, the Escrow Agent and the Members shall have executed and
delivered the Escrow Agreement.
6.2 Additional
Conditions to Obligations of Company.
The
obligations of the Company to consummate and effect the Mergers shall be subject
to the satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by the
Company:
(a) Representations
and Warranties.
Each
representation and warranty of Key contained in this Agreement that is qualified
as to materiality shall
have been true and correct (i) as of the date of this Agreement, and (ii) on
and
as of the Closing Date with the same force and effect as if made on the Closing
Date. Each representation and warranty of Key
contained
in this Agreement that is not qualified as to materiality shall have been true
and correct (x) in all material respects as of the date of this Agreement and
(y) in all material respects on and as of the Closing Date with the same force
and effect as if made on the Closing Date. The Company shall have received
a
certificate with respect to the foregoing signed on behalf of Key
by
an
authorized officer of Key
(“Key
Closing Certificate”).
(b) Agreements
and Covenants.
Key
shall have performed or complied in all material respects with all agreements
and covenants required by this Agreement
to be performed or complied with by it on or prior to the Closing Date, except
to the extent that any failure to perform or comply (other than a willful
failure to perform or comply or failure to perform or comply with an agreement
or covenant reasonably within the control of Key)
does
not, or will not, constitute a Material Adverse Effect with respect to
Key,
and the
Key
Closing
Certificate shall include a provision to such effect.
56
(c) No
Litigation.
No
action, suit or proceeding shall be pending or threatened before any
Governmental Entity which is reasonably likely to (i) prevent
consummation of any of the transactions contemplated by this Agreement, (ii)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation or (iii) affect materially and adversely or otherwise
encumber the title of the shares of Parent
Common
Stock to be issued by Key
in
connection with the
Mergers
and no
order, judgment, decree, stipulation or injunction to any such effect shall
be
in effect.
(d) Consents.
Key
shall have obtained all consents, waivers and approvals required to be obtained
by Key in connection with the consummation
of the transactions contemplated hereby, other than consents, waivers and
approvals the absence of which, either alone or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on Key
and
the
Key
Closing
Certificate shall include a provision to such effect.
(e) Material
Adverse Effect.
No
Material Adverse Effect with respect to Key shall have occurred since the date
of this Agreement.
(f) Opinion
of Counsel.
The
Company shall have received from ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇,
P.C., counsel to Key, an opinion of counsel reasonably acceptable to the
Company.
(g) Other
Deliveries.
At or
prior to Closing, Key shall have delivered to the Company (i) copies of
resolutions and actions taken by Key’s board of directors in connection with the
approval of this Agreement and the transactions contemplated hereunder, and
(ii)
such other documents or certificates as shall reasonably be required by the
Company and its counsel in order to consummate the transactions contemplated
hereunder.
(h) Press
Release.
Key
shall have delivered the Press Release to the Company, in a form reasonably
acceptable to the Company.
(i) Resignations.
The
persons listed on Schedule
6.2(i)
shall
have resigned from all of their positions and offices with Key.
(j) Trust
Fund.
Key
shall have made appropriate arrangements with Continental to have the Trust
Fund
disbursed to
Key
immediately upon the Closing.
(k) Registration
Rights Agreement.
The
Registration Rights Agreement among Parent and the Members, in substantially
the
form of Exhibit
F,
shall
be in full force and effect.
(l) Warrant
Lock-Up Agreements.
Those
Persons set forth on Schedule
6.2(l)
shall
have entered into lock-up agreements with Parent with respect to their warrants
and shares of Key Common Stock underlying such warrants, in form and substance
reasonably satisfactory to the Company.
(m) Short
Sales.
Those
Persons discussed in Section 5.18 above shall have delivered a commitment not
to
engage in Short Sales.
57
(n) Assumption
of Bridge Loan.
Parent
shall have assumed the Company’s obligations under that certain bridge loan
described on Schedule
6.2(n)
attached
hereto (the “Bridge
Loan”).
(o) Key
Initial Shareholder Escrow.
The
following shareholders of Key (the “Key
Initial Shareholders”)
shall
have agreed to place an aggregate of 500,000 shares of their Key Common Stock
in
escrow on the following terms and conditions: each of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
(153,518 shares), ▇▇▇ ▇▇▇▇▇▇▇▇ (60,821 shares), ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (42,333 shares),
Trust F/B/O Alexander & ▇▇▇▇ ▇▇▇▇▇▇▇▇ DTD 9/2/93 (22,222 shares), W. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ (55,555 shares), ▇▇▇▇ ▇. ▇▇▇▇▇▇ (40,000 shares), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
(33,334 shares), ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (33,334 shares), ▇▇. ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇ (22,222 shares), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (17,778 shares), ▇▇▇▇ ▇▇▇▇▇▇▇▇
(13,883 shares) and Elkhorn Partners Limited Partnership (5,000 shares) shall
have placed such shares in escrow to be released to each Key Initial
Shareholder, pro rata in accordance with the amounts placed in such escrow
on
the following conditions: (i) for the 2008 Performance Period, an aggregate
of 100,000 shares to be released if after tax earnings of the Company is
$42,000,000 or higher and an additional 70,000 shares will be released if after
tax earnings in such period is $52,000,000 or higher, (ii) for the 2009
Performance Period, an aggregate of 100,000 shares to be released if after
tax
earnings of the Company is $60,000,000 or higher and an additional 70,000 shares
will be released if after tax earnings in such period is $70,000,000 or higher,
and (iii) for the 2010 Performance Period, an aggregate of 100,000 shares
to be released if after tax earnings of the Company is $72,000,000 or higher
and
an additional 60,000 shares will be released if after tax earnings in such
period is $82,000,000 or higher. Any shares not released from escrow under
this
provision shall be forfeited and returned to Parent. For purposes of this
provision and the escrow to be created hereunder, the “after tax earnings” of
the Company shall be computed and all share numbers shall be computed in the
same manner as such figures and numbers are calculated for purposes of Earn-Out
Shares.
6.3 Additional
Conditions to the Obligations of Key.
The
obligations of Key to consummate and effect the Mergers shall be subject to
the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by
Key:
(a) Representations
and Warranties.
Each
representation and warranty of the Company contained in this Agreement that
is
qualified as to materiality shall have been true and correct (i) as of the
date
of this Agreement and (ii) on and as of the Closing Date with the same force
and
effect as if made on the Closing Date. Each representation and warranty of
the
Company contained in this Agreement that is not qualified as to materiality
shall have been true and correct (x) in all material respects as of the date
of
this Agreement and (y) in all material respects on and as of the Closing Date
with the same force and effect as if made on the Closing Date. Parent shall
have
received a certificate with respect to the foregoing signed on behalf of the
Company by an authorized officer of the Company (“Company
Closing Certificate”).
(b) Agreements
and Covenants.
The
Company and the Members shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by them at or prior to the Closing Date except to
the
extent that any failure to perform or comply (other than a willful failure
to
perform or comply or failure to perform or comply with an agreement or covenant
reasonably within the control of Company) does not, or will not, constitute
a
Material Adverse Effect on the Company, and the Company Closing Certificate
shall include a provision to such effect.
58
(c) No
Litigation.
No
action, suit or proceeding shall be pending or threatened before any
Governmental Entity which is reasonably likely to (i) prevent
consummation of any of the transactions contemplated by this Agreement, (ii)
cause any of the transactions contemplated by this Agreement
to be rescinded following consummation or (iii) affect materially and adversely
the right of Key or Parent to own, operate or control any of the assets and
operations of Key, Cay, or any Surviving Entity following the Mergers
or
compel Key or Parent to dispose of or hold separate all or any material portion
of the assets or operations of Cay, or any Surviving Entity and no order,
judgment, decree, stipulation or injunction to any such effect shall be in
effect.
(d) Consents.
The
Company shall have obtained all consents, waivers, permits and approvals
required to be obtained by the Company in connection with
the
consummation of the transactions contemplated hereby, other than consents,
waivers and approvals the absence of which, either alone or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on
the
Company
and the
Company Closing Certificate shall include a provision to such effect.
(e) Reorganization.
The
reorganization of the
Company
and its
Subsidiaries as set forth on Schedule
2.2(a)
hereto
shall have been completed.
(f) Material
Adverse Effect.
No
Material Adverse Effect with respect to the Company shall have occurred since
the date of this Agreement.
(g) Employment
Agreements.
Employment Agreements (including non-competition covenants) between the Company
and each of ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇, substantially in the forms of
Exhibit
H,
shall
be in full force and effect.
(h) Opinion
of Counsel.
Parent
shall have received from ▇▇▇▇▇▇▇▇▇ Traurig, P.A., counsel to the Company, an
opinion of counsel reasonably acceptable to Key.
(i) Comfort
Letters.
Parent
shall have received “comfort” letters in the customary form from Moore,
Stephens, ▇▇▇▇▇▇▇▇, P.A., dated the date of distribution
of the Proxy Statement and the Closing Date (or such other date or dates
reasonably acceptable to Key)
with
respect to certain financial statements and other financial information included
in the Proxy Statement.
(j) Lock-Up
Agreements.
Lock-Up
Agreements between Parent and each of the Persons identified in Section 5.11,
substantially in the form of Exhibit
G,
shall
be in full force and effect.
(k) Other
Deliveries.
At or
prior to Closing, the Company shall have delivered to Parent: (i) copies of
resolutions and actions taken by the Company’s
board
of directors and Members in connection with the approval of this Agreement
and
the transactions contemplated hereunder, and (ii) such other documents or
certificates as shall reasonably be required by Parent
and
its
counsel in order to consummate the transactions contemplated
hereunder.
59
(l) Derivative
Securities.
There
shall be outstanding no options, warrants or other derivative securities
entitling the holders thereof to acquire shares of Company membership interests
or other securities of the Company or any of its Subsidiaries.
(m) Interested
Party Transactions.
All
interested party transactions, as described in Section 2.24, including any
loans
or other advances to or between the Company and any Subsidiary and any Member,
officer or director (or any affiliate of any of the foregoing) shall have been
terminated or repaid in full as applicable.
(n) Right
of First Refusal.
The
Company (or appropriate Subsidiary) shall have been granted a right of first
refusal with respect to the commercial development of the Island Homes property
and to purchase a portion of such property commercially developed at cost (all
costs, including development costs, carrying costs and transfer costs) which
right of first refusal will be in form and substance reasonably satisfactory
to
Parent and Key.
ARTICLE
VII
INDEMNIFICATION
7.1 Indemnification
of Key and the Company.
(a)
Subject to the terms and conditions of this Article VII (including without
limitation the limitations set forth in Section 7.4), Parent, Key and the
Company and their respective representatives, successors and permitted assigns
(the “Key
Indemnitees”)
shall
be indemnified, defended and held harmless, severally by the Members pro rata
in
accordance with the distribution of the Cay Merger Consideration issued to
them,
from and against all Losses asserted against, resulting to, imposed upon, or
incurred by any Key Indemnitee by reason of, arising out of or resulting
from:
(i) the
inaccuracy or breach of any representation or warranty of the Company contained
in this Agreement, or
any
certificate delivered by the
Company
to
Key
pursuant
to this Agreement with respect hereto or thereto in connection with the Closing;
and
(ii) the
non-fulfillment or breach of any covenant or agreement the Company contained
in
this Agreement.
(b) As
used
in this Article VII, the term “Losses”
shall
include all losses, liabilities, damages, judgments, awards, orders, penalties,
settlements, costs and expenses (including, without limitation, interest,
penalties, court costs and reasonable legal fees and expenses) including those
arising from any demands, claims, suits, actions, costs of investigation,
notices of violation or noncompliance, causes of action, proceedings and
assessments whether or not made by third parties or whether or not ultimately
determined to be valid. Solely for the purpose of determining the amount of
any
Losses (and not for determining any breach) for which any party may be entitled
to indemnification pursuant to Article VII, any representation or warranty
contained in this Agreement that is qualified by a term or terms such as
“material,” “materially,” or “Material Adverse Effect” shall be deemed made or
given without such qualification and without giving effect to such
words.
60
7.2 Indemnification
of Third Party Claims.
The
indemnification obligations and liabilities under this Article VII with respect
to actions, proceedings, lawsuits, investigations, demands or other claims
brought against Parent or Key by a Person other than the Company (a
“Third
Party Claim”)
shall
be subject to the following terms and conditions:
(a) Notice
of Claim.
Parent,
acting through the Committee, will give the Members prompt written notice after
receiving written notice of any Third Party Claim or discovering the liability,
obligation or facts giving rise to such Third Party Claim (a “Notice
of Claim”)
which
Notice of Third Party Claim shall set forth (i) a brief description of the
nature of the Third Party Claim, (ii) the total amount of the actual
out-of-pocket Loss or the anticipated potential Loss (including any costs or
expenses which have been or may be reasonably incurred in connection therewith),
and (iii) whether such Loss may be covered (in whole or in part) under any
insurance and the estimated amount of such Loss which may be covered under
such
insurance, and the Representative shall be entitled to participate in the
defense of Third Party Claim at its expense.
(b) Defense.
The
Members shall have the right, at their option (subject to the limitations set
forth in subsection 7.2(c) below) at their own expense, by written
notice to Key,
to
assume the entire control of, subject to the right of Parent
to
participate (at its expense and with counsel of its choice) in, the defense,
compromise or settlement of the Third Party Claim as to which such Notice of
Claim has been given, and shall be entitled to appoint a recognized and
reputable counsel reasonably acceptable to Parent
to
be the
lead counsel in connection with such defense. If the Members are permitted
and
elect to assume the defense of a Third Party Claim:
(i) the
Members shall diligently and in good faith defend such Third Party Claim and
shall keep Parent reasonably informed of the status of such defense; provided,
however, that in the case of any settlement providing for remedies other than
monetary damages for which indemnification is provided, Parent shall have the
right to approve the settlement, which approval will not be unreasonably
withheld; and
(ii) Parent
shall cooperate fully in all respects with the Members in any such defense,
compromise or settlement thereof, including, without limitation, the selection
of counsel, and Parent shall make available to the Members all pertinent
information and
documents under its control.
(c) Limitations
of Right to Assume Defense.
The
Members shall not be entitled to assume control of such defense if (i) the
Third
Party Claim relates to or arises in connection with any criminal proceeding,
action, indictment, allegation or investigation; (ii) the Third Party Claim
seeks an injunction or equitable relief against Parent; or (iii) there is a
reasonable probability that a Third Party Claim may materially and adversely
affect Key other than as a result of money damages or other money
payments.
(d) Other
Limitations.
Failure
to give prompt Notice of Claim or to provide copies of relevant available
documents or to furnish relevant available data shall not affect the
Members’
duty or
obligations under this Article VII, except to the extent (and only to the extent
that) such failure shall have adversely affected the ability of the Members
to
defend
against or reduce the Members’ liability or caused or increased such liability
or otherwise caused the damages for which the Members are obligated to be
greater than such damages would have been had Parent given the Members
prompt
notice hereunder. So long as the Members
are
defending any such action actively and in good faith, Parent shall not settle
such action. Parent shall make available to the Members
all
relevant records and other relevant materials required by them and in the
possession or under the control of Parent, for the use of the Members
in
defending any such action, and shall in other respects give reasonable
cooperation in such defense.
61
(e) Failure
to Defend.
If the
Members, promptly after receiving a Notice of Claim, fail to defend such Third
Party Claim actively and in good faith, Parent will (upon further written
notice) have the right to undertake the defense, compromise or settlement of
such Third Party Claim as it may determine in its reasonable discretion,
provided that the Members
shall
have the right to approve any settlement, which approval will not be
unreasonably withheld or delayed.
(f) Key’s
Rights.
Anything in this Section 7.2 to the contrary notwithstanding, the Members shall
not, without the written consent of Parent, settle or compromise any action
or
consent to the entry of any judgment which does not include as an unconditional
term thereof the giving by the claimant or the plaintiff to Parent of a full
and
unconditional release from all liability and obligation in respect of such
action without any payment by Key.
(g) Members
Consent.
Unless
the Members have consented to a settlement of a Third Party Claim, the amount
of
the settlement shall not be a binding determination of the amount of the Loss
and, if applicable, such amount shall be determined in accordance with the
provisions of the Escrow Agreement.
7.3 Insurance
Effect.
To the
extent that any Losses that are subject to indemnification pursuant to this
Article VII are covered by insurance, Parent shall
use
commercially reasonable efforts to obtain the maximum recovery under such
insurance; provided that Parent
shall
nevertheless be entitled to bring a claim for indemnification under this Article
VII in respect of such Losses and the time limitations set forth in Section
7.4
hereof for bringing a claim of indemnification under this Agreement shall be
tolled during the pendency of such insurance claim. The existence of a claim
by
Parent
for
monies from an insurer or against a third party in respect of any Loss shall
not, however, delay any payment pursuant to the indemnification provisions
contained herein and otherwise determined to be due and owing. If Parent
has
received the payment required by this Agreement from the Members in respect
of
any Loss and later receives proceeds from insurance or other amounts in respect
of such Loss, then it shall hold such proceeds or other amounts in trust for
the
benefit of the Members and shall pay to the Members, as promptly as practicable
after receipt, a sum equal to the amount of such proceeds or other amount
received, up to the aggregate amount of any payments received hereunder or
from
the Escrow Account, as applicable, pursuant to this Agreement in respect of
such
Loss. Notwithstanding any other provisions of this Agreement, it is the
intention of the parties that no insurer or any other third party shall be
(i)
entitled to a benefit it would not be entitled to receive in the absence of
the
foregoing indemnification provisions, or (ii) relieved of the responsibility
to
pay any claims for which it is obligated.
62
7.4 Limitations
on Indemnification.
(a) Survival:
Time Limitation.
The
representations, warranties, covenants and agreements in this Agreement or
in
any writing delivered by the Company to Parent or Key in connection with this
Agreement (including the certificate
required to be delivered by the
Company
pursuant
to Section 6.3(a)) shall survive the Closing until 18 months after the Closing
Date (the “Survival
Period”).
The
indemnification and other obligations under this Article VII shall survive
for
the same Survival Period and shall terminate with the expiration of such
Survival Period, except that: (i) any claims for breach of representation or
warranty made by a party hereunder by filing a demand for arbitration under
Section 10.12 shall be preserved until final resolution thereof despite the
subsequent expiration of the Survival Period and (ii) any claims set forth
in a
Notice of Claim sent prior to the expiration of such Survival Period shall
survive until final resolution thereof. Except as set forth in clause (ii)
above, no claim for indemnification under this Article VII shall be brought
after the end of the applicable Survival Period.
(b) Deductible.
No
amount shall be payable under Article VII unless and until the aggregate amount
of all indemnifiable Losses otherwise payable exceeds $500,000 in the aggregate
(the “Deductible”),
and
no
claim shall be made pursuant to this Article VII until such time as the
aggregate of such Losses exceeds $500,000.
For the
avoidance of doubt, Losses in the amount of $500,000
shall
function as a “deductible,” and only those amounts in excess of $500,000
shall
be
recoverable pursuant to this Article VII. Notwithstanding
anything contained herein to the contrary, the Deductible will not be applicable
to claims arising from fraud, willful misrepresentation or willful misconduct.
(c) Aggregate
Amount Limitation.
(i) In
no
event shall the total aggregate liability of the Indemnified Parties ever exceed
a total value of $37,500,000 (the “Aggregate
Amount Limitation”).
(ii) Notwithstanding
the foregoing, the Aggregate Amount Limitation shall not apply in the case
of
claims arising from fraud, willful misrepresentation or willful misconduct
but
in no event shall the total liability for Losses to any Indemnifying Party
exceed the Cay Merger Consideration less any taxes paid.
(iii) For
purposes of this Article VII, each share of Parent Common Stock included as
Escrow Shares
shall at
all times have a value equal to $7.50 notwithstanding the market price for
the
Parent Common Stock as reported on the OTC BB or any other applicable exchange
or automated quotation system at the time any Claim is made
hereunder.
7.5 Exclusive
Remedy.
Parent
hereby acknowledges and agrees that, from and after the Closing, its sole and
exclusive remedy with respect to any and all claims, whether direct, third
party
or otherwise, for money damages
arising out of or relating to this Agreement shall be pursuant and subject
to
the requirements of the indemnification provisions set forth in this Article
VII. Notwithstanding any of the foregoing, nothing contained in this Article
VII
shall in any way impair, modify or otherwise limit Parent’s
or
the
Company’s
right
to bring any claim, demand or suit against the other party based upon such
other
party’s actual fraud or intentional or willful misrepresentation or omission, it
being understood that a mere breach of a representation and warranty, without
intentional or willful misrepresentation or omission, does not constitute
fraud.
63
7.6 Damages;
No Adjustment to Cay Merger Consideration.
Amounts
paid for indemnification under Article VII shall constitute damages paid by
the
Members for breach of contract and not as an adjustment to the value of the
shares of Parent Common Stock issued by Parent as a result of the Mergers.
7.7 Application
of Escrow Shares.
The
parties acknowledge that all actions to be taken by Parent pursuant to this
Article VII shall be taken on its behalf by the Committee in accordance with
the
provisions of the Escrow Agreement. The Escrow Agent, pursuant to the Escrow
Agreement after the Closing, may apply all or a portion of the Escrow Shares
to
satisfy any claim for indemnification pursuant to this Article VII. The Escrow
Agent will hold the remaining portion of the Escrow Shares until final
resolution of all claims for indemnification or disputes relating
thereto.
ARTICLE
VIII
TERMINATION
8.1 Termination.
This
Agreement may be terminated at any time prior to the Closing:
(a) by
mutual
written agreement of Key and the Company at any time;
(b) by
either
Key or the Company if the Proxy Statement shall not have been mailed to the
record owners of Key Common Stock on or before October
8, 2007;
(c) by
either
Key or the Company if a Governmental Entity shall have issued an order, decree
or ruling or taken any other action, in any case
having the effect of permanently restraining, enjoining or otherwise prohibiting
any of the Mergers,
which
order, decree, ruling or other action is final and nonappealable;
(d) by
the
Company, upon a material breach of any representation, warranty, covenant or
agreement on the part of Key set forth in this Agreement,
or if any representation or warranty of Key shall have become untrue, in either
case such that the conditions set forth in Article VI would not be satisfied
as
of the time of such breach or as of the time such representation or warranty
shall have become untrue, provided, that if such breach by Key is curable by
Key
prior to the Closing Date, then the
Company
may not
terminate this Agreement under this Section 8.1(d) for thirty (30) days after
delivery of written notice from the
Company
to Key
of such breach, provided Key continues to exercise commercially reasonable
efforts to cure such breach (it being understood that the
Company
may not
terminate this Agreement pursuant to this Section 8.1(d) if it shall have
materially breached this Agreement or if such breach by Key is cured during
such
thirty (30)-day period);
(e) by
Key,
upon a material breach of any representation, warranty, covenant or agreement
on
the part of the Company set forth in this Agreement,
or if any representation or warranty of the
Company
shall
have become untrue, in either case such that the conditions set forth in Article
VI would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided, that if such
breach is curable by the
Company
prior to
the Closing Date, then Key may not terminate this Agreement under this Section
8.1(e) for thirty (30) days after delivery of written notice from Key to
the
Company
of such
breach, provided the
Company
continues to exercise commercially reasonable efforts to cure such breach (it
being understood that Key may not terminate this Agreement pursuant to this
Section 8.1(e) if it shall have materially breached this Agreement or if such
breach by the
Company
is cured
during such thirty (30)-day period);
64
(f) by
either
Key or the Company, if, at the Key Stockholders’ Meeting (including any
adjournments thereof), this Agreement and the transactions contemplated
thereby shall fail to be approved and adopted by the affirmative vote of the
holders of Key Common Stock required under Key’s certificate of incorporation,
or the holders of 20% or more of the number of shares of Key Common Stock issued
in Key’s initial public offering and outstanding as of the date of the record
date of the Key Stockholders’ Meeting exercise their rights to convert the
shares of Key Common Stock held by them into cash in accordance with Key’s
certificate of incorporation; and
(g) by
either
Key or the Company if the Closing Date shall not have occurred by October 28,
2007.
8.2 Notice
of Termination; Effect of Termination.
Any
termination of this Agreement under Section 8.1 above will be effective
immediately upon (or, if the termination is pursuant to Section 8.1(d) or
Section 8.1(e) and the proviso therein is applicable, thirty (30) days after)
the delivery of written notice of the terminating party to the other parties
hereto. In the event of the termination of this Agreement as provided in Section
8.1, this Agreement shall be of no further force or effect and the Mergers
shall
be abandoned, except for and subject to the following: (i) Sections 5.6, 5.14,
8.2 and 8.3 and Article X (General Provisions) shall survive the termination
of
this Agreement. The sole remedy of any party hereto for breach of this Agreement
occurring prior to the Closing by any other party hereto shall be limited to
termination of this Agreement, and no party shall have any claim against the
other for damages of equitable relief for breach of this Agreement occurring
prior to the Closing.
8.3 Fees
and Expenses.
Whether
or not the Mergers are consummated and except as otherwise provided herein,
all
fees and expenses incurred in connection with the Mergers including, without
limitation, all legal, accounting, financial advisory, consulting and all other
fees and expenses of third parties incurred by a party in connection with the
negotiation and effectuation of the terms and conditions of this Agreement
and
the transactions contemplated hereby shall be the obligation of the respective
party incurring such fees and expenses.
ARTICLE
IX
DEFINED
TERMS
Terms
defined in this Agreement are organized alphabetically as follows, together
with
the Section and, where applicable, paragraph, number in which definition
of each such term is located:
“2008
Performance Period” Section 1.17(a)
65
“2009
Performance Period” Section 1.17(a)
“2010
Performance Period” Section 1.17(a)
“Affiliate”
Section 2.12(a) and Section 10.2(e)
“Agreement”
Heading
“Approvals”
Section 2.1(a)
“Audited
Financial Statements” Section 2.8 (a)
“Blue
Sky
Laws” Section 1.15(b)
“Bridge
Loan” Section 6.2(n)
“Business
Day” Section 1.1(b)
“Cay
Merger” Section 1.2(a)
“Cay
Merger Consideration” Section 1.6(a)
“Cay
Surviving Entity” Section 1.2(a)
“Charter
Documents” Section 2.2(b)
“▇▇▇▇▇
Trust” Section 1.13(a)
“Closing”
Section 1.3
“COBRA”
Section 2.12(a)
“Code”
Recital C
“Committee”
Section 1.16
“Company”
Heading
“Company
Closing Certificate” Section 6.3(a)
“Company
Contracts” Section 2.21(a)
“Company
Disclosure Schedule” Article II Preamble
“Company
Employee Plan” Section 2.12(a)
66
“Company
Intellectual Property” Section 2.19
“Company
Material Adverse Effect” Article
II Preamble
“Company
Membership Interests” Section 1.6(c)
“Construction
Contract” Section 2.15(j)
“Continental”
Section 1.13(a)
“Corporate
Records” Section 2.1(b)
“Deductible”
Section 7.4(b)
“DGCL”
Section 1.1(a)
“Disclosure
Schedules” Section 5.15
“DOL”
Section 2.12(a)
“Earn-Out
Shares” Section 1.17(b)
“Effective
Time” Section 1.2(b)
“Employee”
Section 2.12(a)
“Employee
Agreement” Section 2.12(a)
“Environmental
Law” Section 2.17(f)
“ERISA”
Section 2.12(a)
“Escrow”
Section 1.13(a)
“Escrow
Agreement” Section 1.13(a)
“Escrow
Shares” Section 1.6(a)
“Evaluation
Date” Section 3.22
“Exchange
Act” Section 1.15(b)
“Florida
Act” Section 1.2(a)
“FMLA”
Section 2.12(a)
“Governmental
Entity” Section 1.15(b)
“Hazardous
Substance” Section 2.17(b)
67
“HIPAA”
Section 2.12(a)
“HSR
Act”
Section 2.5(b)
“Initial
Effective Time” Section 1.1(b)
“Insider”
Section 2.21 (b)(iii)(1)
“Intellectual
Property” Section 2.19
“International
Employee Plan” Section 2.12(a)
“Improvements”
Section 2.15(i)
“IRS”
Section 2.12(a)
“Island
Homes” Section 2.15(m)
“Island
Homes Owner” Section 2.15(m)
“Key”
Heading
“Key
Closing Certificate” Section 6.2(a)
“Key
Common Stock” Section 3.3(a)
“Key
Contracts” Section 3.14(a)
“Key
Convertible Securities” Section 3.3(a)
“Key
Indemnitees” Section 7.1(a)
“Key
Material Adverse Effect” Article III Preamble
“Key
Merger” Section 1.1(a)
“Key
Merger Consideration” Section 1.7(b)
“Key
Merger Sub” Heading
“Key
Plan” Section 5.1(a)
“Key
Preferred Stock” Section 3.3(a)
“Key
SEC
Reports” Section 3.7(a)
“Key
Stock Options” Section 3.3(a)
“Key
Stockholder Approval” Section 5.1(a)
68
“Key
Stockholders’ Meeting” Section 5.1(a)
“Key
Surviving Entity” Section 1.1(a)
“Key
Warrants” Section 3.3(a)
“Knowledge”
Section 10.2(c)
“Lease”
Section 2.15(b)
“Leased
Real Property” Section 2.15(b)
“Legal
Requirements” Section 10.2(a)
“Lien”
Section 10.2(d)
“Losses”
Section 7.1(b)
“Material
Company Contracts” Section 2.21(b)
“Material
Permits” Section 2.7(a)
“Material
Projects” Article II Preamble
“Member/Members”
Heading
“Merger
Form 8-K Section 5.4(a)
“Merger
Sub/Merger Subs” Heading
“Mergers”
Section 1.2(a)
“NASD”
Section 3.18
“Net
Income Statement” Section 1.17(a)
“New
Key
Merger Sub” Heading
“Notice
of Claim” Section 7.2(a)
“Operating
Agreement” Section 2.1(a)
“Optioned
Property Agreement” Section 2.3(b)
“Optioned
Property Mortgage” Section 2.15(c)
“Optioned
Property Projects” Article II Preamble
“Optioned
Property Provider” Article II Preamble
69
“Optioned
Property Redevelopment Agreement” Section 2.15(c)
“Original
Agreement” Recital A
“OTC
BB”
Section 3.18
“Owned
Real Property” Section 2.15(a)
“Owned
Real Property Leases” Section 2.15 (h)
“Parent”
Heading
“Parent
Common Stock” Section 1.6(a)
“Parent
Stock” Section 3.3(b)
“Pension
Plan” Section 2.12(a)
“Performance
Period” Section 1.17(a)
“Person”
Section 10.2(b)
“Press
Release” Section 5.4(a)
“Project
Material Adverse Effect” Article II Preamble
“Proxy
Statement” Section 2.26
“Real
Property” Section 2.15(c)
“Registration
Rights Agreement” Section 1.14
“Requisite
Member Approval” Section 2.4
“Returns”
Section 2.16(a)(i)
“Routine
Operating Contracts” Section 2.21(a)
“Securities
Act” Section 1.14
“Short
Sales” Section 5.18
“Subject
Party” Section 5.6(b)(iii)
“Subsidiary”
Section 2.2(a)
“Survival
Period” Section 7.4(a)
“Surviving
Entities” Section 1.2(a)
70
“Tax/Taxes”
Section 2.16
“Third
Party Claim” Section 7.2
“Trademarks”
Section 2.19
“Trust
Fund” Section 3.20
“U.S.
GAAP” Section 2.8(a)
“Unaudited
Financial Statements” Section 2.8(a)
ARTICLE
X
GENERAL
PROVISIONS
10.1 Notices.
All
notices, requests and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by commercial delivery
service, or sent via e-mail or telecopy (receipt confirmed) to the parties
at
the following addresses or telecopy numbers (or at such other address or
telecopy numbers for a party as shall be specified by like notice):
if
to
Key, to:
▇
▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇ ▇▇▇▇▇▇▇▇
Telephone:
▇▇▇-▇▇▇-▇▇▇▇
Facsimile:
▇▇▇-▇▇▇-▇▇▇▇
with
a
copy to:
▇▇▇▇▇▇▇
▇. ▇▇▇▇, Esq.
Mintz
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇, P.C.
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone:
▇▇▇-▇▇▇-▇▇▇▇
Facsimile:
▇▇▇-▇▇▇-▇▇▇▇
71
if
to the
Company or Members, to:
Cay
Clubs
LLC
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇▇ PT Phoenix, Esq.
Telephone:
▇▇▇-▇▇▇-▇▇▇▇
Facsimile:
▇▇▇-▇▇▇-▇▇▇▇
with
a
copy to:
▇▇▇▇▇
▇.
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, P.A.
▇▇▇
▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone:
▇▇▇-▇▇▇-▇▇▇▇
Facsimile:
407-420-5909
The
parties hereby acknowledge that any notices delivered pursuant to the notice
requirements of the Original Agreement by e-mail from the date of the Original
Agreement to the date hereof constituted valid delivery of such notice under
the
Original Agreement.
10.2 Interpretation.
When a
reference is made in this Agreement to an Exhibit or Schedule, such reference
shall be to an Exhibit or Schedule to this Agreement
unless otherwise indicated. When a reference is made in this Agreement to
Sections or subsections, such reference shall be to a Section or subsection
of
this Agreement. Unless otherwise indicated the words “include,” “includes” and
“including” when used herein shall be deemed in each case to be followed by the
words “without limitation.” The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. When reference is made herein
to
“the business of” an entity, such reference shall be deemed to include the
business of all direct and indirect Subsidiaries of such entity. Reference
to
the Subsidiaries of an entity shall be deemed to include all direct and indirect
Subsidiaries of such entity. For purposes of this Agreement:
(a) the
term
“Legal
Requirements”
shall
mean
any
federal, state, local, municipal, foreign or other law, statute, constitution,
principle of common law,
resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise
put
into effect by or under the authority of any Governmental Entity and all
requirements set forth in applicable Cay Contracts or Key
Contracts;
(b) the
term
“Person”
shall
mean any individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm
or
other enterprise, association, organization, entity or Governmental
Entity;
72
(c) the
term
“Knowledge”
shall
mean
(i) with
respect to the Company and any of its Subsidiaries, actual knowledge, of ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇, (ii) with respect to the Company
and
any of its Subsidiaries, actual knowledge, as to any matter described in
Sections 2.6, 2.7, 2.17 or 2.21(c), of any written notice actually received,
as
evidenced by written proof of delivery, by any member of the Company’s Legal
Department, and (iii) with respect to Key, Parent and the Merger Subs,
actual
knowledge, without any duty to investigate, of
▇▇▇
▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
(d) the
term
“Lien”
shall
mean
any
mortgage, pledge, security interest, lien, charge or encumbrance of any kind
(including, without limitation,
any conditional sale or other title retention agreement or lease in the nature
thereof, any sale with recourse against the seller or any Affiliate of the
seller, or any agreement to give any security interest);
(e) the
term
“Affiliate”
shall
mean,
as
applied to any Person, any other Person directly or indirectly controlling,
controlled by or under direct or indirect
common control with, such Person. For purposes of this definition, “control”
(including with correlative meanings, the terms “controlling,” “controlled by”
and “under common control with”), as applied to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise; and
(f) all
monetary amounts set forth herein are referenced in United States dollars,
unless otherwise noted.
10.3 Counterparts;
Facsimile Signatures.
This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to
the
other parties, it being understood that all parties need not sign the same
counterpart. Delivery by facsimile or by email delivery of a “.pdf” format data
file to counsel for the other party of a counterpart executed by a party shall
be deemed to meet the requirements of the previous sentence.
10.4 Entire
Agreement; Third Party Beneficiaries.
This
Agreement and the documents and instruments and other agreements among the
parties hereto as contemplated by or referred to herein, including the Exhibits
and Schedules hereto (a) constitute the entire agreement among the parties
with
respect to the subject matter hereof and supersede all prior agreements and
understandings both written and oral, among the parties with respect to the
subject matter hereof (including, without limitation, the Original Agreement),
it being understood that the proposed summary of terms between Key and the
Company dated February 23, 2007 is hereby terminated in its entirety and shall
be of no further force and effect; and (b) are not intended to confer upon
any
other Person any rights or remedies hereunder (except as specifically provided
in this Agreement). The representations and warranties contained in this
Agreement and made by the parties hereto were made to and solely for the benefit
of each other.
10.5 Severability.
In the
event that any provision of this Agreement, or the application thereof, becomes
or is declared by a court of competent jurisdiction to be illegal, void or
unenforceable, the remainder of this Agreement will continue in full force
and
effect and the application of such provision to other Persons or circumstances
will be interpreted so as reasonably to effect the intent of the parties hereto.
The parties further agree to replace such void or unenforceable provision of
this Agreement with a valid and enforceable provision that will achieve, to
the
extent possible, the economic, business and other purposes of such void or
unenforceable provision.
73
10.6 Other
Remedies; Specific Performance.
Except
as otherwise provided herein, any and all remedies herein expressly conferred
upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or
by
law or equity upon such party, and the exercise by a party of any one remedy
will not preclude the exercise of any other remedy. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions
of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to seek an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in
equity.
10.7 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the law of
the
State of Delaware regardless of the law that might
otherwise govern under applicable principles of conflicts of law
thereof.
10.8 Rules
of Construction.
The
parties hereto agree that they have been represented by counsel during the
negotiation and execution of this Agreement and, therefore, waive the
application of any law, regulation, holding or rule of construction providing
that ambiguities in an agreement or other document will be construed against
the
party drafting such agreement or document.
10.9 Assignment.
No
party may assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of
the
other parties. Subject to the first sentence of this Section 10.9, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
10.10 Amendment.
This
Agreement may be amended by the parties hereto at any time by execution of
an
instrument in writing signed on behalf of each of the parties.
10.11 Extension;
Waiver.
At any
time prior to the Closing, any party hereto may, to the extent legally allowed,
(i) extend the time for the performance of any
of
the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed
on
behalf of such party. Delay in exercising any right under this Agreement shall
not constitute a waiver of such right.
10.12 Jurisdiction
and Venue.
Any
civil action or legal proceeding arising out of or relating to this Agreement
shall be brought in the federal and state courts located in the State of
Delaware. Each party consents to the jurisdiction of such Delaware court in
any
such civil action or legal proceeding and waives any objection to the laying
of
venue of any such civil action or legal proceeding in such Delaware court.
Service of any court paper may be effected on such party by mail, as provided
in
this Agreement, or in such other manner as may be provided under applicable
laws, rules of procedure or local rules.
74
10.13 JURY
WAIVER.
IN ANY
CIVIL ACTION, COUNTERCLAIM, OR PROCEEDING, WHETHER AT LAW OR IN EQUITY, WHICH
ARISES OUT OF, CONCERNS, OR RELATES TO THIS AGREEMENT, ANY AND ALL TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT, THE PERFORMANCE OF THIS AGREEMENT, OR THE
RELATIONSHIP CREATED BY THIS AGREEMENT, WHETHER SOUNDING IN CONTRACT, TORT,
STRICT LIABILITY, OR OTHERWISE, TRIAL SHALL BE TO A COURT OF COMPETENT
JURISDICTION AND NOT TO A JURY. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY. ANY PARTY MAY FILE AN ORIGINAL COUNTERPART
OR A
COPY OF THIS AGREEMENT WITH ANY COURT, AS WRITTEN EVIDENCE OF THE CONSENT OF
THE
PARTIES TO THIS AGREEMENT OF THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. NEITHER
PARTY HAS MADE OR RELIED UPON ANY ORAL REPRESENTATIONS TO OR BY ANY OTHER PARTY
REGARDING THE ENFORCEABILITY OF THIS PROVISION. EACH PARTY HAS READ AND
UNDERSTANDS THE EFFECT OF THIS JURY WAIVER PROVISION. EACH PARTY ACKNOWLEDGES
THAT IT HAS BEEN ADVISED BY ITS OWN COUNSEL WITH RESPECT TO THE TRANSACTION
GOVERNED BY THIS AGREEMENT AND SPECIFICALLY WITH RESPECT TO THE TERMS OF THIS
SECTION.
75
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed
as of the date first written above.
| KEY HOSPITALITY ACQUISITION CORPORATION | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | |
| CAY CLUBS, INC. | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | |
| KEY MERGER SUB LLC | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | |
| KEY MERGER SUB INC. | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | |
| CAY CLUBS LLC | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ | |
| MEMBERS: | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ | |
| ▇▇▇▇▇ ▇▇▇▇▇▇▇ | ||
| F. ▇▇▇▇ ▇▇▇▇▇ Irrevocable Trust under Agreement dated August 31, 2004 | ||
| |
|
|
| By: | /s/ F. ▇▇▇▇ ▇▇▇▇▇ | |
| F. ▇▇▇▇ ▇▇▇▇▇, as Trustee | ||
76
MEMBER
SIGNATURE PAGE TO MERGER AGREEMENT
By:
77
INDEX
OF EXHIBITS AND SCHEDULES
|
EXHIBITS
|
||
|
EXHIBIT
A
|
—
|
RESERVED
|
|
EXHIBIT
B
|
—
|
CERTIFICATE
OF MERGER - CAY MERGER
|
|
EXHIBIT
C
|
—
|
OPERATING
AGREEMENT OF COMPANY POST-CLOSING
|
|
EXHIBIT
D
|
—
|
KEY
SURVIVING ENTITY CERTIFICATE OF INCORPORATION
|
|
EXHIBIT
E
|
—
|
FORM
OF ESCROW AGREEMENT
|
|
EXHIBIT
F
|
—
|
FORM
OF REGISTRATION RIGHTS AGREEMENT
|
|
EXHIBIT
G
|
—
|
FORM
OF LOCK-UP AGREEMENT
|
|
EXHIBIT
H
|
—
|
FORM
OF EMPLOYMENT AGREEMENTS
|
|
SCHEDULES
|
||
|
SCHEDULE
1.17
|
—
|
CALCULATION
OF EARNOUT SHARES
|
|
KEY
SCHEDULES
|
||
|
SCHEDULE
3.3(a)
|
—
|
CAPITALIZATION
|
|
SCHEDULE
3.3(c)
|
—
|
SHAREHOLDER
AGREEMENTS
|
|
SCHEDULE
3.13
|
—
|
BROKERS
|
|
SCHEDULE
3.14(a)
|
—
|
KEY
CONTRACTS
|
|
SCHEDULE
3.21
|
—
|
GOVERNMENTAL
FILINGS
|
|
SCHEDULE
5.2
|
—
|
OFFICERS
OF KEY AND SURVIVING ENTITY
|
|
SCHEDULE
6.2(i)
|
—
|
RESIGNATIONS
FROM KEY
|
|
SCHEDULE
6.2(l)
|
—
|
LOCK-UP
AGREEMENTS WITH KEY
|
|
SCHEDULE
6.2(n)
|
—
|
BRIDGE
LOAN DESCRIPTION
|
|
COMPANY
SCHEDULES
|
||
|
SCHEDULE
1.6(a)
|
—
|
MEMBERSHIP
INTERESTS AND CAPITALIZATION
|
|
SCHEDULE
1.14
|
—
|
COMPANY
AFFILIATES
|
|
SCHEDULE
2.2(a)
|
—
|
SUBSIDIARIES
AND ORGANIZATIONAL CHART
|
|
SCHEDULE
2.10
|
—
|
ABSENCE
OF CERTAIN CHANGES OR EVENTS
|
|
SCHEDULE
2.12(b)
|
—
|
EMPLOYEE
BENEFIT PLANS AND COMPENSATION
|
|
SCHEDULE
2.15(a)
|
—
|
REAL
PROPERTY
|
|
SCHEDULE
2.15(b)
|
—
|
REAL
PROPERTY LEASES
|
|
SCHEDULE
2.15(h)
|
—
|
OWNED
REAL PROPERTY LEASES
|
|
SCHEDULE
2.17(c)
|
—
|
UNDERGROUND
STORAGE TANKS / ENVIRONMENTAL
|
|
SCHEDULE
2.21
|
—
|
MATERIAL
CONTRACTS
|
|
SCHEDULE
2.22(a)
|
—
|
DIRECTORS
AND OFFICERS
|
|
SCHEDULE
2.23
|
—
|
INSURANCE
COVERAGE
|
|
SCHEDULE
4.1
|
—
|
PROPERTIES
OF INTEREST
|
2