CLUBCORP INC
Business    3  Item 1A       Risk Factors    9
Unresolved Staff Comments    9
Properties    9
Legal Proceedings    11
Submission of Matters to a Vote of Security Holders    11             PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities    12
Selected Financial Data    13
Management’s Discussion and Analysis of Financial Condition and Results of Operations    14
Quantitative and Qualitative Disclosures about Market Risk    32
Financial Statements and Supplementary Data    32
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure    32
Controls and Procedures    33  Item 9B       Other Information    33             PART III
Directors and Executive Officers of the Registrant    34
Executive Compensation    37
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters    41
Certain Relationships and Related Transactions    43
Principal Accountant Fees and Services    43             PART IV
Exhibits and Financial Statement Schedules    45    2    Table of Contents  Part I   Item 1. Business  General  ClubCorp, Inc. (referred to as ClubCorp®, the Company, we, us and our throughout this document) is a holding company incorporated under the laws of the State of Delaware that, through its subsidiaries, owns and operates premier golf and business clubs and destination golf resorts. As of December 27, 2005, we had more than 192,000 memberships and operated 99 country clubs, golf clubs and public golf facilities, three destination golf resorts and 65 business, sports and business/sports clubs in 26 states, Washington D.C. and three foreign countries. Marquee resorts and clubs in our portfolio include Pinehurst® Resort and Country Club in Pinehurst, North Carolina, The Homestead® Resort in Hot Springs, Virginia, Barton Creek Resort and Country Club in Austin, Texas, Firestone® Country Club in Akron, Ohio, Mission Hills® Country Club near Palm Springs, California, and The City Club on Bunker Hill in Los Angeles, California. Golf Digest, Golf Travel and other golf industry publications have consistently ranked several of our nearly 150 golf courses and destination golf resorts among the best in the U.S.  Our operations are organized into three principal business segments: country club and golf facilities, resorts, and business and sports clubs. Other operations that are not assigned to a principal business segment include our real estate operations and our corporate services. Our primary sources of revenue include membership dues, membership fees and deposits, food and beverage operations, golf operations and lodging.  Our predecessor corporation was organized in 1957 under the name Country Clubs, Inc. All references to us also include Country Clubs, Inc. and its successor corporations. For purposes of this document, unless otherwise indicated, references to us also include our various subsidiaries. However, we and each of our subsidiaries are careful to maintain separate legal existence, and general references to us should not be interpreted in any way to reduce the legal distinctions and separateness between subsidiaries or between us and our subsidiaries.  There is currently no public market for our common stock. We are subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended, pursuant to Section 15(d) thereof, because we filed a registration statement on Form S-1, which became effective October 24, 1994 pursuant to the Securities Act of 1933, as amended (the “Registration Statement”). The Registration Statement registered participation interests in the ClubCorp Stock Investment Plan (the “Plan”) and our common stock, at $.01 par value per share (the “Common Stock”), to be sold to the Plan. The Plan was amended and restated on January 1, 1999, to become the ClubCorp Employee Stock Ownership Plan (the “Amended Plan”).  Throughout Item 1 of this document, financial and property information reflects consolidated totals and includes amounts attributable to properties held for sale that are classified as discontinued operations under accounting principles generally accepted in the United States of America. Details of these properties are available in Annex A – “List of Facilities.”  Operations  Background and Philosophy  We were founded in 1957 to develop Brookhaven Country Club in the North Dallas, Texas area. Since that time, we have expanded our operations to 167 facilities. In 1967, we established our first business club on the belief that we could profitably expand our operations by applying our club management skills and member-oriented philosophy to a related line of business. In 1984, we entered the destination resort industry when we capitalized on a turn-around opportunity by acquiring Pinehurst and currently operate three destination resorts. We commenced international operations in 1980 and currently operate seven facilities primarily in Mexico and Australia. In directing our growth since our formation, our management has emphasized quality service and facilities, endeavoring to exceed the expectations of our members and guests.  Mr. Robert H. Dedman, Sr., our founder and former Chairman and CEO, who passed away in August 2002, established ClubCorp on the belief that private clubs represented a significant business opportunity for a company that could combine professional development and management skills with the dedication to personal service necessary to attract and retain members. This commitment to professionalism and personal service is reflected in our member-oriented philosophy: create lasting value for members, guests, employees and financial partners by delivering personalized service and experiences that facilitate life-enhancing relationships, achieve world class results and create pride in belonging.    3    Table of Contents Our management and employees recognize that we are in a relationship business where member and guest satisfaction is essential to long-term growth and profitability. Underlying this philosophy are progressive human resource values and goals which we believe have resulted in superior customer service. Management believes that our member-oriented philosophy and culture set us apart from many of our competitors that focus on short-term returns that may jeopardize member satisfaction and long-term profitability. We are committed to maintaining our leadership position in the golf-related and business and sports club segments by creating an environment where members, guests and employees are treated with respect, trust and honesty. Our policy is to not restrict membership in our facilities on the basis of race, religion, gender or other immutable characteristics.  From ClubCorp’s beginning, we have focused on assembling and maintaining an experienced management team. Our executive officers, including the Chairman of the Board, possess a significant amount of hospitality industry experience. We have also attempted to attract and retain qualified, dedicated managers for our clubs and resorts. These managers possess an average of more than 16 years of experience with our facilities. Senior management believes that our success depends greatly upon the motivation, training and experience of our employees. We provide an extensive, proprietary system of in-house training and education for all of our employees that is designed to improve the quality of services provided to members and guests. See — “Employees.”  Nature of Operations  We operate country club and golf facilities, business and sports clubs and resorts through sole ownership, partial ownership and management agreements. In addition, we perform various corporate services internally and for managed properties and, to a lesser extent, develop and sell real estate adjacent to our facilities. See — “Other Operations and Services.” With respect to our sole ownership operations, in some cases we own the real property where the facility is operated and in other cases we lease the real property from third parties. See Item 2 – “Properties.” Management believes that our existing club, resort and other facilities and our base of club members represent a significant value to us. For example, certain of our country clubs that were developed many years ago are now located in densely populated areas where land of sufficient size to develop a new facility would be prohibitively expensive.  The success of our business is dependent on our ability to attract new members, retain existing members and maintain or increase levels of club usage by members and guests. Although we devote significant resources to promote our facilities and services, many of the factors affecting club membership and usage are beyond our control. Local and federal government laws, including income tax regulations applicable to us and our club members and guests, can adversely influence membership activity. See — “Government Regulation and Environmental Matters.” Changes in consumer tastes and preferences, local, regional and national economic conditions, including levels of disposable income, weather and demographic trends can also have an adverse impact on club membership and usage. See Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors That May Affect Future Operating Results—Seasonality of Demand; Fluctuations in Quarterly Results.”  Country Club and Golf Facilities  Our portfolio of 99 country club and golf facilities is comprised of 89 private and semi-private country and golf clubs with nearly 82,000 memberships as of December 27, 2005, and ten public golf facilities. Our country club and golf facilities are located in 19 states and two foreign countries, providing us with a geographically diverse revenue base. We have focused our operations in this segment on private and semi-private clubs because of our expertise in managing membership-based facilities, the relative competitive position of such clubs as compared to public courses and the stability of recurring membership dues as a primary revenue source.  Operating revenues for our country club and golf facilities segment consist primarily of membership revenues (comprised primarily of membership dues, and to a lesser extent, recognition of deferred membership fees and deposits), golf revenues and food and beverage sales. In 2005, our country club and golf facilities segment generated operating revenues of $530.2 million, or 51.1% of our total revenues, and segment EBITDA of $123.3 million. See Note 11 to the Notes to Consolidated Financial Statements.  Country Clubs. Our 73 private country clubs generally provide one or more golf courses and one or more of the following facilities: dining rooms, lounge areas, meeting rooms, grills, ballrooms, tennis courts, swimming pools and pro shops. Our private country clubs include Firestone, host of the PGA’s World Golf Championships-Bridgestone Invitational for 2006 through 2010 and Mission Hills, home of the LPGA’s annual Kraft-Nabisco Championship which is one of the four major tournaments on the LPGA Tour. Our current international operations include the Jack Nicklaus Signature Course at Vista Vallarta Club de Golf in Puerto Vallarta, Mexico, site of the Champions Tour’s 2006 Puerto Vallarta Blue Agave Golf Classic.  Golf Clubs. Our 16 semi-private golf clubs generally offer both private and public play, a driving range and food and beverage concessions. Our semi-private golf clubs include Nags Head Golf Links in North Carolina and Golden Bear Golf Club at Indigo Run in South Carolina.    4    Table of Contents Public Golf Facilities. Our ten public golf facilities are daily fee courses that offer a “member for the day” experience and generally provide many of the same amenities, facilities and services as our semi-private golf clubs. Daily fee facilities include the Bear’s Best courses, which were formed through a joint venture with Jack Nicklaus’ Golden Bear Golf, Inc. Our two Bear’s Best courses in Las Vegas and Atlanta, respectively, feature replicas of some of the most famous Nicklaus-designed golf holes. The Bear’s Best Las Vegas course was one of the three golf courses used for the 2004 Las Vegas Invitational. The tournament marks the first time a replica course has been a part of the PGA Tour.  Resorts  Each of our three destination resorts focus on delivering quality golf resort lifestyle as well as lodging and conference facilities, dining and lounge areas, golf, tennis, recreational facilities, European style spas and other resort amenities. Our three destination resorts are Pinehurst Resort and Country Club, The Homestead Resort and Barton Creek Resort and Country Club. The resorts segment also includes our sports marketing division, Pinehurst Championship Management, which manages the operations of high profile golf tournaments at Pinehurst and other locations. Operating revenues for our resorts segment consist primarily of lodging revenues, food and beverage sales, golf and merchandise revenues, other amenities and recreation revenues and membership fees. In 2005, our resort segment generated operating revenues of $269.7 million, or 26.0% of our total revenues, and segment EBITDA of $64.8 million. See Note 11 to the Notes to Consolidated Financial Statements.  Pinehurst. Acquired in 1984, Pinehurst is the largest golf resort in the world and is a National Historic Landmark. Pinehurst hosted the 1999 and 2005 U.S. Opens, the shortest interval between hosting at a single facility in the last 50 years. Pinehurst includes eight championship 18-hole golf courses, including the highly acclaimed Pinehurst Course No. 2 (ranked second in Golf Digest’s America’s 100 Greatest Public Courses in 2005-2006), and approximately 465 guest rooms and suites in three separate facilities, including 85 managed rooms to which we have access. In addition to a 31,000 square foot spa facility, Pinehurst also has a golf school, 24 tennis courts, two outdoor swimming pools, nine dining venues, seven retail venues and approximately 55,000 square feet of conference space, which enables the resort to accommodate large group functions. The resort has also been selected to host the 2008 U.S. Men’s Amateur Championship. In Golf Digest’s America’s Top 75 Golf Resorts (2004), Pinehurst was ranked sixth. Pinehurst also has a private country club that at December 27, 2005 had 4,840 memberships.  The Homestead. Founded in 1766 and acquired by ClubCorp in 1993, The Homestead is a National Historic Landmark. The Homestead includes approximately 495 guest rooms and suites, three 18-hole championship golf courses, including the Cascades course (ranked 13th in Golf Digest’s America’s 100 Greatest Public Courses in 2005 - 2006), a golf school, equestrian center, gun club, six tennis courts, an indoor and an outdoor swimming pool, ten downhill ski runs and over 72,000 square feet of conference space, including a 20,000 square foot grand ballroom facility. The Homestead also has a nationally recognized spa and ten dining facilities. In Golf Digest’s America’s Top 75 Golf Resorts (2004), The Homestead was ranked ninth. At December 27, 2005, The Homestead had 261 memberships which was an increase over prior year due to new memberships being generated from a new real estate development in the area.  Barton Creek. Acquired in 1996, Barton Creek is a premier luxury resort in Austin, Texas. Barton Creek has approximately 295 guest rooms and suites, four championship 18-hole golf courses, including Fazio Canyons and Fazio Foothills, the number two and five rated public access courses in Texas by Golfweek magazine in 2005, 11 tennis courts, four dining facilities, more that 30,000 square feet of meeting space, including a ballroom, a 150 seat ampitheater, and a luxurious spa. In Golf Digest’s America’s Top 75 Golf Resorts (2004), Barton Creek was ranked 37th. Barton Creek also includes a private golf club that at December 27, 2005 had 2,578 memberships.  Business and Sports Clubs  Our portfolio of 65 business and sports clubs is comprised of 47 business clubs, 15 business/sports clubs and three sports clubs, with a combined total of more than 101,000 memberships as of December 27, 2005. These facilities are located in 21 states, Washington D.C. and Beijing, China. Each of our business clubs includes dining rooms, bar areas and private meeting rooms. In addition, most of our business clubs are equipped with state-of-the-art media and telecommunications equipment, providing a technologically-enabled work area. Our sports clubs provide an array of facilities which generally include racquetball and squash courts, jogging tracks, exercise areas, weight machines, aerobic studios, swimming pools and, occasionally, tennis and basketball courts. Business/sports clubs combine the ambiance and amenities of our business clubs with the facilities of our premier sports clubs. Our business and sports clubs include The City Club on Bunker Hill in Los Angeles, The Athletic and Swim Club at Equitable Center in New York City, The Metropolitan Club in Chicago, The Citrus Club in Orlando, The Buckhead Club in Atlanta and The Capital Club in Beijing, China. Operating revenues for business and sports clubs segment consist primarily of monthly membership dues and food and beverage sales. In 2005, our business and sports clubs segment generated operating revenues of $223.9 million, or 21.6% of our total revenues, and segment EBITDA of $38.6 million. See Note 11 to the Notes to Consolidated Financial Statements.    5    Table of Contents Other Operations and Services  Real Estate Operations. We manage fractional ownership property owners associations and sell our remaining fractional ownership interests at selected properties through our Owners Club program and develop and sell residential real estate adjacent to our golf facilities. Our principal Owners Club locations are The Homestead in Virginia, Barton Creek in Texas, Hilton Head in South Carolina and Puerto Vallarta, Mexico. Given our strategic initiative to focus on our core businesses, we do not expect to significantly expand our real estate operations in the near future.  Corporate Services. We perform a number of services on a company-wide basis, including certain centralized marketing, accounting, technology support and purchasing functions. We also publish Private Clubs®, an award winning bi-monthly magazine which showcases our member and guest facilities and strategic partner relationships through feature articles and advertising.  Expansion and Development  Historically, we have expanded our operations through strategic acquisitions and development projects; growing from one country club to an extensive list of 167 facilities that now include business clubs, resorts and athletic clubs both domestically and internationally. In the last three years we have re-oriented our strategic focus to our core businesses and divested various non-strategic assets. We are investigating opportunities to manage clubs through management agreements, joint ventures and sole ownership. Since the beginning of 2004, we have added five managed clubs to our portfolio and in early 2006 we added a managed resort. Also, more focus is being placed on reviewing current high-potential properties and allocating capital to expand those properties that we feel will provide a good return on investment.  We are also pursuing multiple new business opportunities around our core competency, which is superior club management and opportunities to combine our resort and club management experience. In addition, we will evaluate potential strategic acquisitions and dispositions and other strategic opportunities and relationships that present themselves.  We continue to place an emphasis on exploring a variety of new growth opportunities. Strategic growth opportunities focus on new products and services that we can offer, as opposed to traditional club management discussed above. Leveraging our member base will be a key strategy for us. We anticipate that some of our growth dollars in 2006 will be generated in this area.  Sales and Marketing  We own and operate a diverse base of country clubs, business and sports clubs and resorts. Based on the specific attributes of each club and its local market, we attempt to position our golf and business clubs, from the premium-end to the entry level of the specific market segments in which they compete, making the club experience available to a variety of target demographics. Our resorts are positioned as “one of a kind” properties with a broad range of activities and services.  As part of our corporate services, we develop and implement national marketing and promotional programs, control trademarks and trademark licensing agreements, engage public relations firms and advertising agencies, coordinate communications with media sources and develop collateral materials. We believe that these coordinated activities provide highly effective, complementary programs to the sales efforts at our individual clubs and resorts.  Our clubs also offer extended member programs. For example, we sponsor the Associate Clubs® Program, which provides members of clubs owned, leased or managed by us with access to other clubs outside a certain radius of the member’s club. In 2001, we added Signature Gold as a new level of Associate Club membership, providing enhanced privileges at a select group of our properties. In 2003, we offered an enhanced Signature Gold program with expanded benefits (including food and beverage) to those members. In cities where multiple Associate Clubs are located, membership in a Society is often available. Society membership provides privileges in many clubs within the same metropolitan area without any radius restrictions and also provides additional benefits such as concierge services and VIP seating at local events.  We believe there are significant opportunities to increase revenues by marketing our interrelated products and services to our existing customer base. We seek to develop and accentuate the unique aspects of our resorts, like Pinehurst, and country clubs, like Firestone, in order to attract repeat customers, encourage group guests to return individually and increase rates charged for our services and amenities.    6    Table of Contents To promote our facilities, we publish Private Clubs magazine, which reaches the majority of the members at our clubs and resorts in addition to our affiliate clubs and resorts. The magazine’s focus is on golf, travel, food, wine, recreation and other aspects of the “private club experience.”  We host a number of professional golf tournaments that not only enhance our name recognition and that of our clubs and resorts but also add additional revenue. During 2005, our facilities hosted several nationally recognized golf tournaments affiliated with, among others, the PGA Tour, the Champions Tour, the LPGA Tour, the Nationwide Tour and the PGA of America. During 2005, some of the most notable tournaments our facilities hosted were the 2005 United States Open Championship at Pinehurst, the Kraft-Nabisco Championship at Mission Hills, the World Golf Championship-NEC Invitational at Firestone Country Club, the Kinko’s Classic of Austin at The Hills Country Club, and the Chick-fil-A Charity Championship at Eagle’s Landing Country Club. Firestone will also host the 2006 through 2010 World Golf Championships - Bridgestone Invitational.  We believe we have established strong relationships with numerous professional organizations including the following:        •   United States Golf Association;        •   PGA Tour and LPGA Tour;        •   Professional Golf Association of America;        •   American Junior Golf Association;        •   National Golf Course Owners Association;        •   Club Managers Association of America;        •   National Club Association;        •   International Health, Racquet & Sports Club Association;        •   National Restaurant Association; and        •   National Golf Foundation.  Relationships such as these have enabled us to bring distinctive tournaments and events, such as the U.S. Open and the Senior PGA Championship, as well as numerous other prestigious events, to our clubs and resorts throughout the world. We also host many United States Tennis Association and Intercollegiate Tennis Association events, including the Omni Hotels Intercollegiate Tennis Championships, along with other athletic activities such as swimming, diving, lawn bowling and croquet.  Government Regulation and Environmental Matters  We are subject to a wide range of federal, state and local environmental laws and regulations, including those governing discharges into the air and water, the storage of petroleum substances and chemicals, the handling and disposal of wastes, and the remediation of contamination arising from spills and releases. Our operations are subject to numerous other laws and regulations, including occupational health and safety, labor and alcoholic beverage control laws and laws relating to access for disabled persons. Changes to these laws or regulations could adversely affect us. We have policies in place designed to bring or keep our facilities in compliance, and audit procedures to inspect for compliance with all current federal, state and local environmental laws. We are not aware of, and have not been informed by the Environmental Protection Agency or any state or local governmental authority of, any non-compliance or violation of any environmental laws, ordinances or regulations likely to be material to us, and we believe that we are in substantial compliance with all such laws, ordinances and regulations applicable to our facilities and operations. See Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors That May Affect Future Operating Results.”  We are subject to the Fair Labor Standards Act and various federal and state laws governing such matters as minimum wage requirements, overtime and other working conditions and citizenship requirements. The salaries of certain of our personnel are based on the federal minimum wage and adopted increases in the minimum wage have historically increased our labor costs. Historically, we have tried to pass these increased labor costs to our customers through price increases. In addition, we are subject to certain state “dram-shop” laws, which provide a person injured by an intoxicated individual the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated individual. We are also subject to the Americans with Disabilities Act of 1990, which, among other things, created federally mandated access and use requirements. We believe we are in substantial compliance with applicable laws and regulations governing our operations.    7    Table of Contents We have operations in a number of states that regulate the licensing of restaurants and resorts, including liquor license grants, by requiring registration, disclosure statements and compliance with specific standards of conduct. While we believe that we are, and will continue to be, in substantial compliance with these requirements, there can be no assurance that these requirements will not change or that any such change will not adversely affect us.  Competition  We operate in a highly competitive industry and our clubs and resorts compete primarily on the basis of management expertise, reputation, featured facilities, quality and breadth of services and price. With respect to our resorts, we compete on a national and international level with numerous hotel and resort companies. Competition in this part of the industry is intense and there can be no assurance that such competition will not adversely affect revenues, costs or operating income of our resorts. Our country club and golf facilities compete on a local and regional level with other country club and golf facilities and our business and sports clubs compete on a local and regional level with high-end restaurants and other business and sports clubs. The level of competition in these lines of business varies from region to region and is subject to change as existing facilities are renovated or new facilities are developed. An increase in the number or quality of similar clubs and other facilities in a particular region could significantly increase competition, which could have a material adverse effect on our results from that region. Our results of operations also could be affected by a number of additional competitive factors, including the availability of, and demand for, alternative forms of recreation.  We also compete for the operation of golf courses with national and regional golf course management companies, and, less frequently, with individuals and small ventures that typically own one or more golf courses. There are opportunities for consolidation in the highly fragmented golf course ownership industry in the U.S. and the industry has seen a modest level of consolidation in recent years. In the acquisition of golf courses, companies compete primarily on the basis of price and their reputation for operating golf courses. Many of our competitors have substantially greater capital resources than we do, sometimes providing them the ability to pay substantially more for the type of facilities consistent with those in our portfolio and strategy.  Throughout the 1990’s and early 2000’s, there was a substantial increase in the development of public golf facilities in the U.S. Competition in this market has intensified and the increase in availability of daily fee courses has adversely affected demand in portions of the semi-private and private club market. According to the National Golf Foundation, the growth in supply of available golf courses, fueled by the daily fee market, has outpaced growth in the number of golfers in recent years. New golf course construction has steadily declined since 2001, due to the acknowledgment of overbuilding in certain markets and fewer residential developers building golf courses to aid in housing sales. In addition to fewer new courses being built, more golf course closings have occurred in the past few years than historically experienced. A resurgence in development of new courses or additional decreases in the average number of golfers per course could adversely affect our business and results of operations. Conversely, golf course overbuilding in certain markets could eventually benefit us, as owners with less financial resources and management experience may be forced to liquidate their properties at discounted prices.  In the operation of our facilities, we compete on the basis of our reputation to deliver value through the quality of the facility and quality of services provided to our members and guests. We believe we compete favorably with respect to these factors. Our Associate Clubs Program with tiered membership levels, allows members of a club in one market to utilize our clubs in different markets, thus enhancing the value of club membership. Our significant portfolio of facilities allows our members to enjoy access to a large number of diverse types of clubs in a wide geographic region. We believe this program affords us a competitive advantage over competitors that do not maintain similar programs and over other competitors that have similar programs, but fewer facilities.  Employees  As of December 27, 2005, we employed approximately 11,100 full-time and 7,200 part-time employees in our operations. The success of our business is dependent in part on our ability to attract and retain experienced management and other employees on economic terms. We believe that our employees represent an important asset; however, we are not dependent upon any single employee, or a small group of employees, whose loss would have a material adverse effect on us. Although we believe that our labor relations are good, increased labor and benefit costs or deterioration in our labor relations could adversely affect our operating results.  Customers  We are not dependent upon a single customer, or a few customers, whose loss would have a material adverse effect on us. In addition, for the fiscal year ended December 27, 2005, there is no customer to which we had sales equal to 10% or more of our consolidated operating revenues.    8    Table of Contents Intellectual Property  We have registered various service marks and trademarks, including the names ClubCorp, CCA, Clubresorts, Associate Clubs, Pinehurst, The Homestead, Barton Creek, Private Clubs and The Society with the U.S. Patent and Trademark Office, and have applied with the U.S. Patent and Trademark Office for the registration of various other service marks and trademarks. In addition, we have registered certain of our service marks and trademarks in a number of foreign countries. We regard our service marks and trademarks as valuable assets and intend to protect such service marks and trademarks vigorously against infringement.  Available Information  We file annual, quarterly and current reports and other information with the Securities and Exchange Commission (the “SEC”). These reports may be viewed and copied at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549 or at the SEC’s internet site www.sec.gov, as soon as practicable after such material is electronically filed with the SEC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Our SEC filings are also available free of charge to the public through the Company – Financial Info section of our internet site www.clubcorp.com. The information contained on or linked to our website does not constitute part of the Form 10-K.   Item 1A. Risk Factors  A summary of the risks that affect our business and results of operations is contained in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Risks” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Factors That May Affect Future Operating Results.”   Item 1B. Unresolved Staff Comments  None.   Item 2. Properties  We owned and/or operated 167 country club and golf facilities, business and sports clubs and resorts as of December 27, 2005, one of which is held for sale and is classified as a discontinued operation. The following table provides a summary of the composition of our portfolio of facilities from December 31, 2002 to December 27, 2005:                                       Additions, Divestitures and Reclassifications of Facilities (1)         CountryClubs     GolfClubs     PublicGolf     Business     Business/Sports     Sports     Resorts    International     Total     At December 31, 2002    73     15     14     51     17     4     3    10     187     Facilities added during 2003    —       —       —       —       —       —       —      —       —       Facilities divested during 2003    (4 )   (3 )   (6 )   (5 )   —       (1 )   —      —       (19 )   Reclassifications during 2003    3     5     —       2     —       —       —      (10 )   —                                                               At December 30, 2003    72     17     8     48     17     3     3    —       168     Facilities added during 2004    —       —       2     —       —       —       —      —       2     Facilities divested during 2004    (1 )   —       —       (1 )   (3 )   —       —      —       (5 )                                                           At December 28, 2004    71     17     10     47     14     3     3    —       165     Facilities added during 2005    3     —       —       1     —       —       —      —       4     Facilities divested during 2005    (1 )   (1 )   —       —       —       —       —      —       (2 )   Reclassifications during 2005    —       —       —       (1 )   1     —       —      —       —                                                               At December 27, 2005    73     16     10     47     15     3     3    —       167     Less: Held for Sale    —       —       —       —       —       (1 )   —      —       (1 )                                                           Continuing Operations    73     16     10     47     15     2     3    —       166                                                              (1) Facilities added include acquisitions of owned, leased, partially owned or managed facilities, joint ventures and other investments. Facilities divested include sales of owned or partially owned facilities and other investments, and terminated leases and management agreements that were not renewed or replaced.    9    Table of Contents We continually monitor the performance, composition and characteristics of our portfolio of facilities and actively manage our portfolio through expansions, additions (acquisitions and other investments) and dispositions. We divest a facility when it no longer has strategic value or the potential to contribute to our growth, and an appropriate opportunity for divestiture is available.  Facilities divested also include expired or terminated lease arrangements or management agreements that generally have shorter terms than joint venture agreements or other forms of ownership. We generally include a termination clause in our management agreements which impose a financial penalty, paid to us by the managed owner, to discourage early termination of management agreements.  Our properties are located throughout the U.S. and primarily in Australia and Mexico internationally. In the U.S., a significant portion of our properties are located in Texas, California, Florida and the Southeastern U.S. Due to our concentration of golf facilities in these markets, our operating and financial performance is subject to the regional weather patterns and changes in economic conditions in these areas. See Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors That May Affect Future Operating Results – Seasonality of Demand; Fluctuations in Quarterly Results.” For a complete list of our facilities, see Annex A – “List of Facilities.”  We operate country club and golf facilities, business and sports clubs and resorts through sole ownership, partial ownership and management agreements. With respect to our sole ownership operations, in some cases we own the real property where the facility is operated and in other cases we lease the real property from third parties. The following table summarizes the number of, and reclassifications in, the type of our facilities operated for the periods indicated:                            Sole Ownership      Partial Ownership                    Owned Facilities      Leased Facilities      and Managed      Managed Operations     Total     At December 31, 2002    85     74     17     11     187     Facilities added during 2003    —       —       —       —       —       Facilities divested during 2003    (6 )   (9 )   (2 )   (2 )   (19 )   Reclassifications during 2003    —       —       —       —       —                                        At December 30, 2003    79     65     15     9     168     Facilities added during 2004    —       —       —       2     2     Facilities divested during 2004    —       (4 )   —       (1 )   (5 )                                    At December 28, 2004    79     61     15     10     165     Facilities added during 2005    —       1     —       3     4     Facilities divested during 2005    (1 )   (1 )   —       —       (2 )   Reclassifications during 2005    —       1     (1 )   —       —                                        At December 27, 2005    78     62     14     13     167     Less: Held for Sale    (1 )   —       —       —       (1 )                                    Continuing Operations    77     62     14     13     166                                     Our various ownership interests in, and other relationships with, the facilities in our portfolio reflect a number of strategic and management considerations. We own the majority of our country club and golf facilities while we lease substantially all of the real property where our business and sports clubs operate. This distinction reflects the fact that a particular piece of real property such as a golf course can be essential to the operation of a golf facility and, therefore, it is generally in our interest to own or have a long-term management or lease contract for such property. A business club facility, on the other hand, generally can be located in any one of a number of locations and moved from one location to another as long as it remains convenient to its members. Therefore, we believe it is generally not necessary for us to have a long-term interest in the properties where our business and sports clubs are located. Our focus on adding management deals is reflected in our 2004 and 2005 additions.  For our leased facilities, including our corporate offices in Dallas, Texas, we generally pay a monthly base rent, as well as charges for real estate taxes, common area maintenance and various other items. In some cases, we must also pay a percentage of gross receipts or positive net cash flow. In most instances, we have full authority over the operation of the leased facilities, except in some cases where the owner remains responsible for major structural repairs or for property insurance or real estate taxes.    10    Table of Contents  Item 3. Legal Proceedings  We are subject to certain pending or threatened litigation and other claims that arise in the ordinary course of business. While the outcome of such legal proceedings and other claims cannot be predicted with certainty, after review and consultation with legal counsel, we believe that any potential liability from these matters would not materially affect our consolidated financial position and results of operations.   Item 4. Submission of Matters to a Vote of Security Holders  During the fourth quarter of 2005, no matter was submitted to a vote of security holders through the solicitation of proxies or otherwise.    11    Table of Contents  Part II   Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities  There is currently no public market or publicly available quotations for our common stock. In connection with the Amended Plan, we have engaged an independent financial advisory firm, Houlihan Lokey Howard and Zukin Financial Advisors, Inc., to render a semi-annual opinion on the fair market value of our common stock at the end of our second quarter and fiscal year. This fair market value is based upon a multiple of our recurring cash flows from operations, with certain exceptions for specific assets, including certain long-term investments valued at the lower of cost or market. Under this arrangement, the stock valuation process is independent of our Board of Directors and management. The most recent appraised value of our common stock was $12.91 per share at June 30, 2005.  At our option, we have historically repurchased stock from shareholders when offered for sale to us on a limited basis. The Stockholders Agreement with The Cypress Group L.L.C. (see Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Equity”) limits our stock repurchases, without their prior authorization, to $2.5 million per year from Nancy Dedman, Robert H. Dedman, Jr., Patricia Dedman Dietz, and the Dedman Foundation and related trusts in total, $5.0 million per year from certain charitable and non-profit organizations, and $2.5 million per year from all other shareholder groups.  As a means of providing liquidity to the trustees of the Amended Plan, we have provided the trustees a limited put right (the Redemption Right) to cause us to redeem common stock, held in trust on behalf of the Amended Plan, at the most recent appraised fair market value as necessary, in the event the trust does not have adequate resources, to meet the following requirements: (1) to fund a participant’s distribution in cash, (2) to diversify a participant’s account in accordance with Internal Revenue Code Section 401(a)(28), (3) to pay expenses incurred by the trustees, and (4) to comply with directions from the plan administrator. The Redemption Right has never been exercised by the Amended Plan. We do not expect that the Redemption Right will be exercised in 2006, but if it is, we could be required to repurchase shares of common stock. The Redemption Right is not limited by the Stockholders Agreement with the Cypress Group L.L.C.  We have never paid cash dividends on our common stock. Management expects to continue its policy of retaining earnings for use in our business, and accordingly, does not expect to pay cash dividends in the foreseeable future. As of March 27, 2006, there were approximately 320 holders of record of our common stock.    12    Table of Contents  Item 6. Selected Financial Data  Set forth below are selected consolidated statement of operations and balance sheet data for each of the fiscal years in the five year period ended December 27, 2005 (1). The table presented below should be read in conjunction with Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” Item 7A — “Quantitative and Qualitative Disclosures about Market Risk” and Item 8 — “Financial Statements and Supplementary Data” (dollars in thousands, except membership and lodging data).                                 December 25,2001     December 31,2002     December 30,2003     December 28,2004     December 27,2005     Statement of Operations Data:                             Operating revenues    $ 923,786     $ 916,659     $ 892,709     $ 938,802     $ 1,028,088            Operating costs and expenses      723,827       727,440       692,171       720,129       783,512     Depreciation and amortization      88,187       88,917       92,465       90,216       86,636     Selling, general and administrative expenses      80,545       87,381       78,162       68,157       70,476     Gain/(Loss) on disposals and impairment of assets      (42,554 )     (27,777 )     (8,144 )     (6,523 )     35,572                                                Operating income (loss) from continuing operations    $ (11,327 )   $ (14,856 )   $ 21,767     $ 53,777     $ 123,036                                                Income (loss) from continuing operations    $ (99,723 )   $ (46,951 )   $ (109,947 )   $ (4,240 )   $ 70,675     Income (loss) from discontinued operations      (6,127 )     (14,603 )     4,701       (2,002 )     79                                                Net Income (loss)    $ (105,850 )   $ (61,554 )   $ (105,246 )   $ (6,242 )   $ 70,754                                                Diluted earnings (loss) per common share from continuing operations    $ (1.06 )   $ (0.50 )   $ (1.17 )   $ (0.05 )   $ 0.75                                                Balance Sheet Data:                             Cash (including restricted cash)    $ 3,212     $ 2,426     $ 90,195     $ 124,922     $ 210,325     Total assets    $ 1,593,295     $ 1,553,543     $ 1,528,654     $ 1,517,985     $ 1,547,707     Long-term debt (including current portion)    $ 640,250     $ 666,406     $ 720,886     $ 707,833     $ 671,618     Membership deposits (including current portion)    $ 106,741     $ 120,339     $ 133,692     $ 153,716     $ 169,614     Stockholders’ equity    $ 420,649     $ 382,406     $ 279,610     $ 259,880     $ 316,865            Other Operating Information:                                    Total memberships at end of year:                             Country clubs and golf facilities      86,860       83,251       78,691       81,961       81,855     Resorts      8,901       8,123       8,043       7,732       7,679     Business and sports clubs      118,545       113,621       102,016       102,505       101,284     Other operations and services      5,460       4,854       1,308       1,315       1,323                                                Total memberships at end of year      219,766       209,849       190,058       193,513       192,141                                                Lodging data (2)                             Room nights available      433,524       432,432       432,432       432,432       430,976     Room nights sold      225,530       224,240       239,680       253,850       260,130     Paid occupancy rate      52.0 %     51.9 %     55.4 %     58.7 %     60.4 %   Revenue per occupied room    $ 735     $ 764     $ 725     $ 735     $ 752     Revenue per available room    $ 382     $ 396     $ 402     $ 432     $ 454      (1) We report our financial results on a 52/53 week basis, with the first three quarters consisting of 12 weeks each and the fourth quarter consisting of either 16 weeks (2001, 2003, 2004 and 2005) or 17 weeks (2002).    (2) Lodging data is for Pinehurst, The Homestead and Barton Creek.    13    Table of Contents  Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations  The following discussion and analysis should be read in conjunction with Item 6 — “Selected Financial Data,” Item 7A — “Quantitative and Qualitative Disclosures about Market Risk” and Item 8 — “Financial Statements and Supplementary Data.”  Overview  General  We are a holding company incorporated under the laws of the State of Delaware that, through our subsidiaries, owns and operates premier golf and business clubs and destination golf resorts. Our operations are organized into three principal business segments: country club and golf facilities, resorts and business and sports clubs. Other operations that are not assigned to a principal business segment include our real estate operations and our corporate services. We operate our properties through sole ownership, partial ownership (including joint venture interests), operating leases and management agreements.  Our Consolidated Financial Statements are presented on a 52/53 week fiscal year, with the first three quarters consisting of 12 weeks each and the fourth quarter consisting of either 16 weeks (2003, 2004 and 2005) or 17 weeks.  Our revenues consist primarily of revenues derived from membership dues, food and beverage operations, golf operations, lodging, and recognition of deferred membership fees and deposits. All revenue sources are recognized in the period earned, which is generally at the time of sale or when the service is provided. See “Membership Fees and Deposits” below. Operating costs and expenses primarily consist of employee compensation, food and beverage costs and general and administrative costs. All operating costs are expensed as incurred.  The following table presents our consolidated operating revenues attributable to each of our business segments for fiscal years 2003, 2004 and 2005 (dollars in thousands):                      Fiscal Year Ended       December 30,2003    December 28,2004    December 27,2005  Continuing Operations:                  Country Club and Golf Facilities    $ 480,763    $ 504,347    $ 525,381   Resorts      196,846      209,893      269,743   Business and Sports Clubs      202,960      210,992      218,698   Other Operations and Services      12,140      13,570      14,266                          Subtotal - Continuing Operations      892,709      938,802      1,028,088        Discontinued Operations:                  Country Club and Golf Facilities      11,449      5,287      4,789   Resorts      —        —        —     Business and Sports Clubs      19,441      12,481      5,215   Other Operations and Services      —        —        —                            Subtotal - Discontinued Operations      30,890      17,768      10,004                          Consolidated Operating Revenues    $ 923,599    $ 956,570    $ 1,038,092                           14    Table of Contents Critical Accounting Policies and Estimates  The process of preparing financial statements in conformity with accounting principles generally accepted in the U.S. requires us to use estimates and assumptions to determine certain of our assets, liabilities, revenues and expenses. We base these estimates and assumptions upon the best information available to us at the time the estimates or assumptions are made. Our estimates and assumptions could change materially as conditions both within and beyond our control change. Accordingly, our actual results could differ materially from our estimates. The most significant estimates made by our management include estimated lives used to amortize membership fees and deposits, impairment of long-lived assets and realization of our deferred income tax assets. The following is a discussion of our critical accounting policies and the related management estimates and assumptions necessary in determining the value of related assets or liabilities. A full description of all of our significant accounting policies is included in Note 1 to our Consolidated Financial Statements. Our management has discussed the development and calculation of the following critical accounting policies and estimates with the audit committee of our board of directors and the audit committee has reviewed our disclosure of them in this section.  Membership Fees and Deposits. At the majority of our private clubs, members are expected to pay an initiation fee or deposit upon their acceptance as a member to the club. These initiation fees and deposits vary in amount based on a variety of factors such as the supply and demand for our services in each particular market, number of golf courses or breadth of amenities available to the members and the prestige of having the right to membership in the club. In general, membership fees are not refundable, but membership deposits are refundable after a number of years.  The majority of membership deposits are not refundable until a fixed number of years (generally 30) after the date of acceptance of a member, and are expected to cover our cost of providing services to the member over the course of the individual’s membership. Because of the refundable nature of our deposits and the fact that few of our clubs have membership caps, we believe that revenue related to deposits should be recognized over the average expected life of an active membership. This position is supported by our prior correspondence with the SEC on this matter in 1998. For membership deposits, the difference between the amount paid by the member and the present value of the refund obligation is deferred and recognized as membership fees and deposits revenue on a straight-line basis over the average expected life of an active membership, which was six years for golf and resort memberships and five years for business and sports club memberships through 2005. The present value of the refund obligation is recorded as a membership deposit liability in our consolidated balance sheet and accretes over the nonrefundable term using the effective interest method with an interest rate defined as our weighted average borrowing rate adjusted to reflect a 30-year time frame. The accretion is included in interest expense. The majority of our membership fees are not refundable and are deferred and recognized over the average expected life of an active membership.  The calculation of the average expected life of an active membership is a critical estimate in the recognition of revenues and expenses associated with membership fees and deposits. Average expected life of an active membership is calculated separately for business and sports clubs and country clubs and golf and resort facilities combined by taking the inverse of the total number of members lost in a particular period divided by the total number of members at the end of the prior period. This base-level calculation is performed at the end of each fiscal year, and a 10-year rolling average of each year’s data is used to determine the final average expected life of an active membership to be used in the upcoming year. Periods in which attrition rates differ significantly from enrollment rates could have a material effect on our Consolidated Financial Statements by decreasing or increasing the average expected life of an active membership, which in turn would affect the length of time over which we recognize revenues and expenses associated with our membership fees and deposits. Because membership fees and deposits generally have minimal direct incremental costs associated with them, a change in our average expected life of an active membership would likely materially affect our operations and EBITDA.  At the end of 2005, the 10-year rolling average expected life of an active membership for country clubs and golf and resort facilities combined increased to seven years. This change will be effective at the beginning of fiscal year 2006 and has no effect on the amount of revenue that will ultimately be recognized. It will change the amount of revenue that will be recognized in 2006 as new sales will be amortized over an additional year. There was no change to the business and sports clubs 10-year rolling average expected life of an active membership.  For the year ended December 27, 2005, membership fees and deposits of $27.1 million for country club and golf facilities, $5.9 million for resorts, $2.2 million for business and sports clubs and $0.2 million for other operations and services, respectively, were recognized as revenue in our Consolidated Statements of Operations.    15    Table of Contents Impairment of Long-Lived Assets. In accordance with SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, our long-lived assets to be held and used and to be disposed of are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment charges are recorded as a component of operating income or loss in our Consolidated Statements of Operations.  For assets held for sale, fair value is determined using information on known purchase price commitments from potential buyers, less estimated incremental direct costs to sell the property in question. Changes in purchase prices due to market conditions, a potential buyer’s due diligence process or other factors beyond our control such as the emergence of unanticipated selling costs can materially affect estimates of fair value and the amount of impairment charges recorded in a particular period.  For assets to be held and used, we perform a recoverability test to determine if the future undiscounted cash flows over our expected holding period for the property exceed the carrying amount of the assets of the property in question. If the recoverability test is not met, fair value is determined by comparing the carrying value of the property to its future discounted cash flows using a risk-adjusted discount rate. Future cash flows of each property are determined using management’s projections of the performance of a given property based on its past performance and expected future performance given changes in marketplace, local operations and other factors both within our control and out of our control. Additionally, we review current property appraisals when available to assess recoverability. Actual results that differ from these estimates can generate material differences in impairment charges recorded, and ultimately, net income or loss in our Consolidated Statements of Operations and the carrying value of properties on our Consolidated Balance Sheet.  For the year ended December 27, 2005, impairment charges of $7.4 million for country club and golf facilities, $0.8 million for other operations and services and $0.7 million for business and sports clubs, respectively, were recognized as a component of operating income (loss) in our Consolidated Statements of Operations.  Valuation Allowance for Deferred Income Tax Assets. Our valuation allowance relates to the deferred tax assets arising from our federal income tax net operating loss, or NOL, carryforwards and capital loss carryforwards. Historically, our valuation allowance has been evaluated based on our projections of future taxable income and capital gains over the periods in which the net operating and capital losses will be carried forward combined with tax planning strategies. We have recorded taxable losses in each of the prior five fiscal years not including the year ended December 27, 2005. In accordance with guidance in SFAS No. 109 and industry practice, because we have a pattern of taxable losses, we can not overcome that pattern and assume that we will have future taxable income. Therefore, we must use more objective evidence in our evaluation, basing our analysis solely on carrybacks and future reversals of existing taxable temporary differences, as well as certain tax planning strategies. In 2005, we had taxable income of approximately $86.6 million, which included a capital gain from the sale of land at one of our properties. This allowed us to utilize our entire $24.4 million gross capital loss carryforward and approximately $62.2 million of our gross NOL balance which were both previously reserved in our valuation allowance. In addition, $131.3 million of our gross NOL balance expired unused at the end of 2005 but resulted in no charge to operations as it was fully reserved in our valuation allowance. Our capital loss and NOL carryforward balances were able to shelter 100% of the regular tax liability created by our current year taxable income. In addition, we were able to shelter the maximum allowed alternative minimum tax, or AMT, liability with available AMT NOL carryforward balances. Our current year activity had minimal impact on the net realizable value of our NOL balance. See Note 15 to the Consolidated Financial Statements and “Factors That May Affect Future Operating Results – Income Taxes.”    16    Table of Contents Results of Operations  2005 U.S. Open  During the week of June 13-19, 2005, we hosted the U.S. Open at Pinehurst. For the year ended December 27, 2005, we generated approximately $50.5 million in operating revenue and $12.6 million in operating income from merchandise sales, ticket sales and rental of corporate hospitality tents related to the U.S. Open. The results of operations from the U.S. Open are primarily reflected in our resorts segment; however, a portion of the expenditures were incurred by corporate services and are reflected in other operations and services. In addition to the effect on current year, we also incurred $3.3 million of expenses related to the U.S. Open in the three previous years for planning, maintenance and preparation. Therefore, we generated approximately $9.3 million of cumulative operating income from hosting the 2005 U.S. Open.  Aliso Viejo Land Sale  In December 2005, we completed a sale of land to be used for the development of a master-planned residential community in the city of Aliso Viejo, California. As part of our agreement with the city of Aliso Viejo, we will manage a city-owned community conference center, an aquatic facility, and a park on the land which will be funded by the city and the purchaser of the land. In addition, we committed to develop a new clubhouse at Aliso Viejo, which we will own and operate along with a reconfigured 18-hole golf course. We received net cash proceeds of approximately $85 million after funding required escrows related to development of the clubhouse and paying various costs. The proceeds from this sale have been used to increase our cash reserves. The transaction resulted in a pre-tax gain of $46 million that is reflected on our Consolidated Statements of Operations in gain/(loss) on disposals and impairment of assets. Additionally, we have $10 million in deferred gain related to our commitment to develop the new clubhouse. This sale decreased real estate held for sale by $23 million in 2005.      General   We analyze operating results and manage our business segments using the following concepts and definitions:  We employ “same store” analysis techniques for a variety of management purposes. By our definition, facilities are evaluated yearly and considered “same store” once they have been fully operational for one year. Developing facilities and divested facilities are not classified as same store; however, facilities held for sale and held and used are considered same store until they are divested. This distinction between developing and same store facilities allows us to separately analyze the operating results of our established and new facilities. We believe this approach provides an effective analysis tool because it allows us to assess the results of our core operating strategies by tracking the performance of our same store facilities without the distortions that would be caused by the inclusion of developing properties. Facilities divested during a period are removed from the same store classification for all periods presented. We analyze membership and lodging data on a same store basis as well, as it is not distorted by divestitures and we believe it provides a clearer picture of trends in our continuing operations.  Operating revenues are comprised mainly of revenues from membership dues, golf, food and beverage and lodging, as well as the revenues recognized from membership deposits and fees. All revenue sources are recognized in the period earned, which is generally at the time of sale or when the service is provided. Operating expenses include payroll and related expenses, other fees and expenses and rent. All operating costs are expensed as incurred.  We evaluate segment performance and allocate resources based on each segment’s EBITDA. We also use EBITDA to monitor our property-level and overall performance. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. EBITDA should not be construed as an alternative to, or a better indicator of, operating income or loss, is not based on accounting principles generally accepted in the United States of America, and is not necessarily a measure of our cash flow or ability to fund our cash needs. Our measurement of EBITDA may not be comparable to similarly titled measures reported by other companies. See Note 11 of the Notes to Consolidated Financial Statements for a reconciliation of this measure to our consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America.  As of our reporting for the period ended September 9, 2003, we adjusted our segment information to be more in line with our internal reporting. The two key components that were changed were recording elimination entries at the consolidated level instead of allocating them to each segment and reviewing gain/loss from disposal and impairment of assets at the consolidated level. The remaining numbers by segment (operating revenues, operating expenses, depreciation and amortization and EBITDA) then reflect the numbers that help drive our business decisions. Reclassifications have been made for all periods presented in accordance with generally accepted accounting principles.    17    Table of Contents Year Ended December 27, 2005 Compared to Year Ended December 28, 2004  The impact from hosting the 2005 U.S. Open is described in detail in Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—2005 U.S. Open. All discussion in Consolidated Operations—Continuing Operations and Segment and Other Information—Resorts will exclude the impact of the U.S. Open in order to discuss the year over year analysis on a more comparable basis.  Consolidated Operations – Continuing Operations  Operating revenues increased in all three operating divisions – country club and golf facilities, resorts and business and sports clubs – ending the year at $977.6 million, an improvement of more than 4% over 2004. Country club and golf facilities operating revenue increased more than 4% over 2004, with the most significant contributions in membership dues and food and beverage revenue. Resorts operating revenues increased more than 4% over 2004 primarily related to increases in golf operations, food and beverage, lodging and retail sales at Pinehurst and Barton Creek offset by decreases in food and beverage and lodging at The Homestead. Business and sports clubs operating revenue increased 4% over 2004 primarily due to increased membership dues and food and beverage revenue.  Operating costs and expenses for country club and golf facilities, resorts and business and sports clubs generally increased as a result of costs related to increased operating revenues. Country club and golf facilities operating costs and expenses primarily increased in food and beverage, golf operations and golf course maintenance. Resorts operating costs and expenses primarily increased in lodging, retail and golf course maintenance. Business and sports clubs operating costs and expenses primarily increased in food and beverage operations.  Operating income increased in all three operating segments. The Aliso Viejo land sale resulted in a $46 million gain to operating income. Operating income for country club and golf facilities reflected improved margins in food and beverage operations resulting from better management of cost of goods sold and payroll costs offset by decreased margins in golf operations due to increased costs for golf course maintenance. Resorts operating income improved in golf operations, lodging and retail primarily due to monitoring payroll and payroll related costs. Business and sports clubs operating income improved primarily due to increased volume with a relatively flat food and beverage margin.  Consolidated Operations—Discontinued Operations  The years ended December 28, 2004 and December 27, 2005 include five properties divested in 2004, two properties divested in 2005 and one property currently held for sale in discontinued operations. Operating revenues for these properties decreased from $17.8 million in 2004 to $10.0 million in 2005. Net income (loss) from these properties improved $2.0 million from 2004 to 2005 due to operating losses from the entities divested in 2004. In accordance with SFAS 144, depreciation expense is not recorded beginning with the quarter a property is classified as held for sale.    18    Table of Contents Segment and Other Information  Country Club and Golf Facilities  The following tables present certain summary financial and membership information for our country club and golf facilities segment for 2004 and 2005 (dollars in thousands):                         Same Store Country Cluband Golf Facilities     Total Country Club and Golf Facilities     2004    2005    2004    2005   Number of facilities at end of period in continuing operations      92      92      96      99   Operating revenues    $ 466,820    $ 485,383    $ 476,034    $ 498,342   Recognition of membership fees and deposits      28,097      26,896      28,313      27,039                                 Total operating revenues    $ 494,917    $ 512,279    $ 504,347    $ 525,381         Operating costs and expenses (1)      378,563      391,538      386,366      402,266                                 Segment EBITDA from continuing operations (1)    $ 116,354    $ 120,741    $ 117,981    $ 123,115                                 Segment EBITDA from discontinued operations (1)    $ —      $ —      $ 232    $ 139                                 Total Segment EBITDA (1)    $ 116,354    $ 120,741    $ 118,213    $ 123,254                                  (1) Excludes intercompany consulting and support fees of $25.3 million and $26.2 million for Same Store and $26.8 million and $27.6 million for Total in 2004 and 2005, respectively.  Continuing Operations. Total operating revenues increased comparing 2004 to 2005 for same store country club and golf facilities primarily due to increased membership dues and food and beverage revenues. Membership dues increased 4% as a result of price increases and increased member count. Food and beverage revenues increased nearly 6% as a result of increased volume, partially due to clubs investing additional time and resources to selling and pre-booking private party events in 2005, offset by a decrease in check average. Golf revenues have increased due to price increases for green fees and cart rentals offset by a decrease in rounds played primarily due to heavy rains on the West coast early in the year.  Segment EBITDA increased comparing 2004 to 2005 for same store country club and golf facilities as a result of increased operating revenues, partially offset by a related increase in operating costs and expenses. Operating costs and expenses increased due to inflation as well as increased spending on golf course maintenance to maintain the high level of our course conditions even in a time of decreased usage. The increase in costs is primarily covered by our dues pricing increases. Food and beverage operating margins improved slightly after a very slow start to the year due to improved cost of goods and management of payroll costs. Depreciation and amortization increased from $50.0 in 2004 to $50.7 million in 2005.  Discontinued Operations. The years ended December 28, 2004 and December 27, 2005 include one managed property divested in 2004 and two properties divested in 2005 in discontinued operations.    19    Table of Contents Resorts  The following tables present certain summary financial data and lodging data for our resort segment for 2004 and 2005 (dollars in thousands, except lodging data):                     Same Store and Total Resorts         2004     2005     Number of facilities at end of period in continuing operations (1)      3       3     Operating revenues    $ 203,815     $ 263,885     Recognition of membership fees and deposits      6,078       5,858                        Total operating revenues    $ 209,893     $ 269,743         Operating costs and expenses (2)      161,326       204,977                        Segment EBITDA from continuing operations (2)    $ 48,567     $ 64,766                        Segment EBITDA from discontinued operations (2)    $ —       $ —                          Total Segment EBITDA (2)    $ 48,567     $ 64,766                        Lodging data (3 resorts) (1)              Room nights available      432,432       430,976     Room nights sold      253,850       260,130     Paid occupancy rate      58.7 %     60.4 %   Average daily rate (3)    $ 189     $ 195     Revenue per occupied room (4)    $ 735     $ 752      (1) Number of facilities and lodging data is comprised of data from wholly owned resorts consisting of Pinehurst, The Homestead and Barton Creek.    (2) Excludes intercompany consulting and support fees of $9.0 million and $5.6 million for Same Store and Total in 2004 and 2005, respectively.    (3) Average daily rate is based on the average room rate per day for the year-to-date.    (4) Revenue per occupied room is based on total operating revenues excluding membership dues, recognition of member initiation fees and net managed rooms commissions.  The discussion below excludes the impact of the U.S. Open.  Continuing Operations. Total operating revenues increased comparing 2004 to 2005 for same store resorts primarily due to higher occupancy, average daily rate and spending at Pinehurst and Barton Creek. Pinehurst revenue increased primarily due to a $15 increase in average daily rate and increased spending on golf and retail. Rounds played on our higher fee premium courses increased over 2004. Additionally, occupancy increased slightly at Pinehurst. Barton Creek revenue increased slightly due to a large increase in occupancy and a $6 increase in average daily rate offset by a decrease in spending. Homestead revenues decreased as spending and average daily rate were consistent comparing 2004 to 2005 but occupancy decreased.  Segment EBITDA improved comparing 2004 to 2005 for same store resorts. Pinehurst improved in golf operations, lodging and retail sales primarily due to improved management of payroll and other expenses offset by a slight decrease in food and beverage due to higher cost of goods sold. Barton Creek improved in food and beverage, lodging and retail sales primarily due to improved payroll management. Homestead improved in golf operations offset by a decrease in food and beverage, lodging and retail sales as a result of decreased occupancy. Depreciation and amortization increased slightly from $16.3 million in 2004 to $16.4 million in 2005.    20    Table of Contents Business and Sports Clubs  The following tables present certain summary financial and membership information for our business and sports clubs segment for 2004 and 2005 (dollars in thousands):                         Same Store Businessand Sports Clubs     Total Business and Sports Clubs       2004    2005    2004    2005   Number of facilities at end of period in continuing operations      63      63      63      64   Operating revenues    $ 208,777    $ 216,549    $ 208,777    $ 216,611   Recognition of membership fees and deposits      2,215      2,088      2,215      2,087                                 Total operating revenues    $ 210,992    $ 218,637    $ 210,992    $ 218,698         Operating costs and expenses (1)      176,555      180,898      176,555      180,898                                 Segment EBITDA from continuing operations (1)    $ 34,437    $ 37,739    $ 34,437    $ 37,800                                 Segment EBITDA from discontinued operations (1)    $ 820    $ 809    $ 1,477    $ 820                                 Total Segment EBITDA (1)    $ 35,257    $ 38,548    $ 35,914    $ 38,620                                  (1) Excludes intercompany consulting and support fees of $10.9 million and $13.5 million for Same Store and $11.4 million and $13.6 million for Total in 2004 and 2005, respectively.  Continuing Operations. Total operating revenues increased comparing 2004 to 2005 at same store business and sports clubs primarily due to increased food and beverage private party revenues and membership dues. Food and beverage private party revenues increased nearly 6% due to an increase in both volume and pricing. Membership dues increased more than 3% primarily due to a dues price increase in early 2005 partially offset by a decrease in member count.  Segment EBITDA increased at same store business and sports clubs comparing 2004 to 2005 due to increased revenue partially offset by a related increase in operating costs and expenses, primarily food and beverage costs. Food and beverage margins remained relatively flat when comparing 2004 to 2005 due to a slight improvement in cost of goods and payroll management offset by other expenses. Depreciation and amortization decreased from $10.9 million in 2004 to $9.1 million in 2005 due to the acceleration of depreciation in prior year related to leasehold improvements resulting in several fully depreciated assets.  Discontinued Operations. The years ended December 28, 2004 and December 27, 2005 include four properties divested in 2004 and one property currently held for sale in discontinued operations.  Other Operations and Services – Continuing Operations  Other operations and services consist primarily of real estate operations and our corporate services. Revenues increased from $13.6 million in 2004 to $14.3 million in 2005 primarily due to fees we receive from third-party developers based on a percentage of their real estate sales. Lot sales decreased slightly from $4.5 million in 2004 to $3.6 million in 2005.  Operating loss from other operations and services increased from $50.5 million in 2004 to $51.6 million in 2005. The change was due to revenue increases mentioned above as well as a rebate of previously incurred costs and a favorable legal settlement related to property taxes offset by increased insurance costs related to higher claims, a penalty and interest payment made to the IRS related to payroll taxes and the impairment of our investment in a consulting company. Additionally in 2005, we incurred approximately $1 million of expenses in corporate services related to the hosting of the 2005 U.S. Open.    21    Table of Contents Year Ended December 28, 2004 Compared to Year Ended December 30, 2003  Consolidated Operations – Continuing Operations  Operating revenues increased in all three operating divisions – country club and golf facilities, resorts and business and sports clubs – ending the year at $938.8 million, an improvement of more than 5%. Country club and golf facilities operating revenue increased 5% over 2003, with the most significant contributions in membership dues and food and beverage revenue. Resorts operating revenue increased 7% compared to 2003 primarily due to increases in food and beverage, golf operations, lodging and other recreation revenue at all three resorts. Business and sports clubs operating revenue increased 4% primarily due to food and beverage revenue as well as membership dues.  Operating costs and expenses for country club and golf facilities, resorts and business and sports clubs increased consistent with revenue increases previously mentioned. Operating costs and expenses for other operations and services improved primarily due to a lack of recurrence of significant vacation and litigation charges that occurred in 2003 as well as reductions in payroll and payroll related costs, general and administrative, other miscellaneous and insurance.  Operating income increased for country club and golf facilities and resorts operating divisions while business and sports clubs decreased slightly. Operating income for country club and golf reflected improved margins in food and beverage offset partially by decreased margins for golf operations. Resorts operating income reflected improved margins in golf operations and retail sales offset by slight decreases in food and beverage and lodging margins.  Discontinued Operations  The years ended December 30, 2003 and December 28, 2004 include 19 properties divested in 2003, five properties divested in 2004, two properties divested in 2005 and one property currently held for sale in discontinued operations. Operating revenues for these properties decreased from $30.9 million in 2003 to $17.8 million in 2004. Net income (loss) decreased $6.7 million from 2003 to 2004. In accordance with SFAS 144, depreciation expense is not recorded beginning with the quarter a property is classified as held for sale.    22    Table of Contents Segment and Other Information  Country Club and Golf Facilities  The following tables present certain summary financial and membership information for our country club and golf facilities segment for 2003 and 2004 (dollars in thousands):                         Same Store Country Cluband Golf Facilities     Total Country Club and Golf Facilities       2003    2004    2003    2004   Number of facilities at end of period in continuing operations      92      92      94      96   Operating revenues    $ 445,783    $ 466,820    $ 450,704    $ 476,034   Recognition of membership fees and deposits      30,059      28,097      30,059      28,313                                 Total operating revenues    $ 475,842    $ 494,917    $ 480,763    $ 504,347         Operating costs and expenses (1)      365,675      378,563      370,109      386,366                                 Segment EBITDA from continuing operations (1)    $ 110,167    $ 116,354    $ 110,654    $ 117,981                                 Segment EBITDA from discontinued operations (1)    $ —      $ —      $ 1,060    $ 232                                 Total Segment EBITDA (1)    $ 110,167    $ 116,354    $ 111,714    $ 118,213                                  (1) Excludes intercompany consulting and support fees of $24.4 million and $25.3 million for Same Store and $25.8 million and $26.8 million for Total in 2003 and 2004, respectively.  Continuing Operations. Total operating revenues increased from 2003 to 2004 for same store country club and golf facilities primarily due to increased food and beverage revenues, membership dues and golf operations revenues. Food and beverage revenues for both a la carte and private party increased. A la carte improved 15% as a result of increased activity and a higher check average while an increase in private party activity was slightly offset by a decrease in check average resulting in a 8% increase. Membership dues increased 4% as a result of price increases and an increase in Signature Gold activity. Golf operations increased slightly due to higher paid rounds and cart rental fees as a result of the increased activity at our clubs. The impact of numerous hurricanes and heavy rains significantly decreased the number of rounds played in 2004.  Segment EBITDA increased from 2003 to 2004 for same store country club and golf facilities as a result of increased operating revenues, partially offset by a related increase in operating costs and expenses. Operating costs and expenses increased primarily due to the increased usage at our clubs which resulted in increased food and beverage and golf operations expenses. Overall, food and beverage operating profit improved when comparing 2003 to 2004 while golf operating margin decreased due to lower rounds played caused by inclement weather.  Discontinued Operations. The years ended December 30, 2003 and December 28, 2004 include 13 properties divested in 2003, one managed property divested in 2004 and two properties divested in 2005 in discontinued operations.    23    Table of Contents Resorts  The following tables present certain summary financial data and lodging data for our resort segment for 2003 and 2004 (dollars in thousands, except lodging data):                     Same Store and Total Resorts         2003     2004     Number of facilities at end of period in continuing operations (1)      3       3     Operating revenues    $ 190,617     $ 203,815     Recognition of membership fees and deposits      6,229       6,078                        Total operating revenues    $ 196,846     $ 209,893         Operating costs and expenses (2)      150,194       161,326                        Segment EBITDA from continuing operations (2)    $ 46,652     $ 48,567                        Segment EBITDA from discontinued operations (2)    $ —       $ —                          EBITDA (2)    $ 46,652     $ 48,567                        Lodging data (3 resorts) (1)              Room nights available      432,432       432,432     Room nights sold      239,680       253,850     Paid occupancy rate      55.4 %     58.7 %   Average daily rate (3)    $ 188     $ 189     Revenue per occupied room (4)    $ 725     $ 735      (1) Number of facilities and lodging data is comprised of data from wholly owned resorts consisting of Pinehurst, The Homestead and Barton Creek.    (2) Excludes intercompany consulting and support fees of $8.6 million and $9.0 million for Same Store and Total in 2003 and 2004, respectively.    (3) Average daily rate is based on the average room rate per day for the entire fiscal year.    (4) Revenue per occupied room is based on total operating revenues excluding membership dues, recognition of member initiation fees and net managed rooms commissions.  Continuing Operations. Total operating revenues increased comparing 2003 to 2004 for same store resorts primarily due to increased food and beverage, lodging, other recreation and golf operations. Food and beverage a la carte and private party revenues increased 6% and 16%, respectively, as a result of higher occupancy and spending by social guests during 2004 at all of the resorts. A la carte revenues were mainly driven by higher occupancy rates while private party revenues had a significant increase in check average. Lodging revenues increased 7% as a result of increased room nights and higher average room rates from the prior year, primarily at Barton Creek. Other recreation revenues increased 10% as a result of increased spa revenues at The Homestead and Pinehurst as well as increased ski revenues at The Homestead. Golf revenues increased 8% primarily due to increased play on the premium courses at Pinehurst.  Segment EBITDA increased from 2003 to 2004 for same store resorts due to increased revenue discussed above offset by a related increase in operating costs and expenses. Operating costs and expenses increased due to higher food and beverage expenses related to the higher occupancy and spending mentioned above at all of the resorts as well as increased wages at The Homestead due to staffing of temporary employees. Other recreation operating expenses increased primarily due to increased usage at The Homestead related to spa and ski activities. Lodging expenses increased primarily at The Homestead due to increased payroll costs from the staffing of temporary employees. Golf operations expenses increased due to higher maintenance costs at all of the resorts.    24    Table of Contents Business and Sports Clubs  The following tables present certain summary financial and membership information for our business and sports clubs segment for 2003 and 2004 (dollars in thousands):                         Same Store Businessand Sports Clubs     Total Business and Sports Clubs       2003    2004    2003    2004   Number of facilities at end of period in continuing operations      63      63      63      63   Operating revenues    $ 200,545    $ 208,777    $ 200,545    $ 208,777   Recognition of membership fees and deposits      2,415      2,215      2,415      2,215                                 Total operating revenues    $ 202,960    $ 210,992    $ 202,960    $ 210,992         Operating costs and expenses (1)      170,263      176,555      170,267      176,555                                 Segment EBITDA from continuing operations (1)    $ 32,697    $ 34,437    $ 32,693    $ 34,437                                 Segment EBITDA from discontinued operations (1)    $ 747    $ 820    $ 847    $ 1,477                                 EBITDA (1)    $ 33,444    $ 35,257    $ 33,540    $ 35,914                                  (1) Excludes intercompany consulting and support fees of $11.0 million and $10.9 million for Same Store and $12.0 million and $11.4 million in Total in 2003 and 2004, respectively.  Continuing Operations. Total operating revenues increased comparing 2003 to 2004 at same store business and sports clubs primarily due to increased food and beverage revenues and membership dues. Food and beverage a la carte revenues increased 7% due to pricing increases while increases in private party revenues of 6% were driven by volume. Membership dues increased more than 2% primarily due to the impact of expanding the Signature Gold program being offered at the business clubs in 2004. Signature Gold dues increased $1.6 million or more than 24% from 2003 to 2004.  Segment EBITDA increased at same store business and sports clubs from 2003 to 2004 due to an increase in operating costs and expenses primarily related to higher food and beverage sales. Operating margins were positively impacted by improved food and beverage margins due to expense controls in purchasing and operations. Rent expense increased $1.3 million due to strong operating results affecting contingent rent payments.  Discontinued Operations. The years ended December 30, 2003 and December 28, 2004 include six properties divested in 2003, four properties divested in 2004 and one property currently held for sale in discontinued operations.  Other Operations and Services – Continuing Operations  Other operations and services consist primarily of real estate operations and our corporate services. Included in results for other operations and services for the year ended December 28, 2004 are lot sales at one of our real estate operations of $2.3 million. We also recorded a charge of $5.2 million to cover the estimated settlement of an outstanding lawsuit related to one of our former properties (we previously charged $1.0 million related to this lawsuit) as well as established an escrow of $5.7 million. We settled the lawsuit for $5.9 million. The escrow was released and $0.3 million remaining accrual was reversed. We also received a $5.0 million ($3.4 million net of legal costs) recovery of costs in a matter related to this lawsuit that was settled out of court and recorded as a recovery of previously accrued expenses. During the year ended December 30, 2003, we recorded charges totaling $4.1 million related to three lawsuits to cover settlement charges (see Note 14 of the Notes to Consolidated Financial Statements) and $5.9 million to accrue for vacation earned by employees. In 2003 we also recorded a charge of $1.2 million for severance related to downsizing and $1.7 million additional reserves related to health insurance.  Operating loss from other operations and services improved from 2003 to 2004 primarily due to a lack of recurrence of significant vacation and litigation charges that occurred in 2003 as well as decreases in payroll and payroll related costs, general and administrative, depreciation and amortization, other miscellaneous and insurance. Payroll and payroll related costs decreased due to a corporate and regional reorganization that led to reductions in personnel during 2003 and early 2004. General and administrative expenses decreased primarily related to the implementation of cost cutting initiatives during 2003 showing positive results in 2004. Fewer sales in our real estate operations led to a reduction of other miscellaneous expenses. Depreciation and amortization decreased as several fixed assets became fully depreciated in 2004 and insurance costs decreased due to a lower number of health claims.    25    Table of Contents Liquidity and Capital Resources  Our primary goal as it relates to liquidity and capital resources is to attain and retain the right level of debt and cash to maintain our core properties, fund expansions at our current properties, and be poised for external growth in the marketplace. During the last few years, our focus has been on strengthening our cash position and refinancing and reducing our debt in order to support these goals. Our cash position has increased to $189 million as of December 27, 2005 compared to $96 million as of December 28, 2004. The primary reason for the increase was the Aliso Viejo land sale from which we received $85 million in net cash proceeds. Our debt was refinanced in 2003 and has been paid down to $672 million as of December 27, 2005. We have paid down approximately $47 million since December 28, 2004.  Historically, we have financed our operations and cash needs primarily through cash flows from operations, debt and, to a lesser extent, proceeds from divestitures. We anticipate using cash flow from operations in 2006 principally to fund planned capital replacement expenditures, repay debt and build cash reserves. We expect to use our cash reserves in 2006 to grow and expand our business through a combination of improvements and expansions of existing facilities, on which we spent approximately $78 million in 2005. Based on our current projections, we believe our current assets and cash flow from operations are sufficient to meet our anticipated working capital and operating needs for the next 12 months as well as support our anticipated capital expenditures.  Debt  The majority of our outstanding debt at December 27, 2005 was obtained as a result of major refinancings that took place during 2003. The refinancings resulted in mortgage portfolios which had a combined notional amount of approximately $658 million, including both fixed and variable rate portions. The combined refinancings were comprised of first mortgages on 40 properties and increased borrowings on two existing mortgage loans (see Note 8 of the Notes to Consolidated Financial Statements).  Under the provisions of certain of our debt agreements with Textron Financial Corporation (“Textron”), we are required to maintain debt service coverage ratios at both the portfolio and individual property level. Certain of these individual loans have cross-default provisions; therefore, a default on an individual loan triggers a default on the portfolio. As of December 27, 2005, the debt service coverage ratio was below the minimum level for four individual properties participating in the loan, thereby causing the entire loan ($53 million in principal amount) to be in technical default. We cured the noncompliance by obtaining letters of credit totaling $2.7 million.  In early 2006, we amended a loan agreement representing approximately $37 million of debt maturing in 2006 and established a secured $50 million line of credit which will mature in 2010. As a result, we paid down approximately $32 million and transferred the remaining $5 million as an initial draw on the line of credit.  Cash and Cash Flow  Our cash flow from operations was $121 million for the year ended December 27, 2005, an increase of $2 million over 2004. In addition to our daily operating transactions, a key component of our annual operating cash comes from our membership programs. Membership deposits and fees represent advance initiation deposits for the right to become a member. Membership deposits are generally not refundable until a fixed number of years (generally 30 years) after the date of acceptance as a member while membership fees are not refundable. Cash from deposits is used to fund our normal operations. Revenue recognition of these deposits is deferred and amortized as discussed in Item 7 — “Critical Accounting Policies and Estimates.” We allow new members to defer a portion of the payment of fees and deposits as an incentive for them to join. Although this practice adversely affects the current amount of cash received for fees and deposits, it is subsequently offset through the receipt of recurring membership dues and other revenues received from these members.  We utilize cash to fund operations, maintain our properties, pay down our debt and related interest, and, to a limited extent, buy back company stock. In 2005, we reduced debt by nearly $47 million and increased our cash and cash equivalents by more than $92 million. For 2006, we are considering additional investments in improving and expanding our existing properties or acquiring new properties.    26    Table of Contents Capital Spending  The nature of our business requires us to invest a significant amount of capital in our existing properties to maintain them. For 2005, we expended approximately $68 million in maintenance capital, and we anticipate spending approximately $69 million in 2006 for maintenance capital.  In addition to maintaining our properties, we also spend discretionary capital to expand existing properties and to enter into new business opportunities. Capital expansion funding totaled approximately $10 million in 2005, and we anticipate spending an additional $40 million in 2006 for expansion and improvement projects on clubs and resorts we feel have a high potential for return on investment.  Risks  We believe that we have sufficient and stable funds to allow us to operate our business for the next 12 months as well as evaluate growth opportunities during 2005 and beyond. However, the occurrence of any of the following events might limit our ability to fund operations or provide adequate capital funding:      •   Lack of compliance with debt covenants – currently our defaults on the Textron note are covered by letters of credit. However, should operations cause adverse results at one or a group of properties, we may need to pay down debt or secure additional financing, which might not be available on favorable terms and conditions or at all.      •   Exercise of the limited put right by our ESOP – As a means of providing liquidity to the trustees of the Amended Plan, we have provided the trustees a limited put right (the “Redemption Right”) to cause us to redeem Common Stock, held in trust on behalf of the Amended Plan, at the most recent appraised fair market value as necessary, in the event the trust does not have adequate resources, to meet the following requirements: (1) to fund a participant’s distribution in cash, (2) to diversify a participant’s account in accordance with Internal Revenue Code Section 401(a)(28), (3) to pay expenses incurred by the trustees, and (4) to comply with directions from the plan administrator. The Redemption Right has never been exercised by the Amended Plan. We do not expect that the Redemption Right will be exercised in 2006, but if it is, we could be required to repurchase shares of Common Stock.      •   Exercise of certain rights by our third party investor – During 1999, we sold 9,375,000 shares of common stock and warrants to acquire 1,012,500 shares of common stock to The Cypress Group. Beginning in December 2004, we are obligated under certain defined conditions to offer to repurchase a portion of their outstanding shares if we are below a defined leverage ratio. This calculation is performed annually on December 1st. Based on the calculation, we were above the stated leverage ratio and were not required to offer to repurchase any shares during 2005. However, if our actual future operating results differ materially from expectations, we could fall below the leverage ratio and would be required to offer to repurchase a portion of their shares of Common Stock. We do not anticipate this occurring in 2006.      •   Natural disaster or catastrophic events - Events out of our control could cause significant operational implications and/or an inability to obtain financing.  We do not anticipate any of the above situations occurring. Additionally, these risks are somewhat mitigated due to the fact that a significant portion of our capital expansions and new growth spending is discretionary. However, we cannot assure you that these events will not occur.    27    Table of Contents Off-Balance Sheet Arrangements, Contractual Obligations and Commercial Commitments  We are not aware of any off-balance sheet arrangements as of December 27, 2005. The following tables summarize our total contractual obligations and other commercial commitments and their respective payment or commitment expiration dates by year as of December 27, 2005 (dollars in thousands):  Contractual Obligations                                 Less than    Payments due by Period    More than       Total    1 year    1 - 3 years    3 - 5 years    five years   Long-Term Debt    $ 657,994    $ 69,839    $ 220,846    $ 151,534    $ 215,775   Capital Lease Obligations      13,624      5,765      7,060      799      —     Membership Deposits (1)      169,614      18,341      5,875      8,903      136,495   Other Long-Term Obligations (2)      15,566      6,150      —        —        9,416   Operating Leases      164,095      17,966      33,188      28,282      84,659                                        Total Contractual Cash Obligations    $ 1,020,893    $ 118,061    $ 266,969    $ 189,518    $ 446,345                                         (1) Represents the estimated fair value of membership deposits based on the discounted value of future maturities using our incremental borrowing rate. See Note 4 of the Notes to Consolidated Financial Statements. The present value of the membership deposit obligation is recorded as a liability in our Consolidated Balance Sheet and accretes over the nonrefundable term using the effective interest method. At December 27, 2005, the gross amount of non-defeased membership deposit obligations was $518 million.    (2) Consists of insurance reserves for general liability and workers’ compensation of $15.6 million, of which $6.2 million is classified as current. The remainder of our other long-term obligations consists of deferred revenue and other non-cash items which do not affect our consolidated cash position. See Note 9 of the Notes to Consolidated Financial Statements.  Commercial Commitments                            Total    Less than1 year    1 - 3 years    3 - 5 years    More thanfive years   Standby Letters of Credit (1)    $ 19,001    $ 19,001    $ —      $ —      $ —     Standby Repurchase Obligations (2)(3)      53,026      —        —        —        53,026   Debt Letters of Credit (4)      2,650      2,650      —        —        —     Capital Commitments (5)      19,250      1,250      18,000      —        —                                          Total Commercial Commitments    $ 93,927    $ 22,901    $ 18,000    $ —      $ 53,026                                         (1) Letters of credit are primarily related to secure future estimated claims for workers’ compensation and general liability insurance. Our commitment amount for insurance-related letters of credit is gradually reduced as obligations under the policies are paid. See Note 2 on the Contractual Obligations table above regarding reserves for workers’ compensation and general liability insurance.    (2) We have provided the trustees of the Amended Plan a limited put right to cause us to redeem our common stock at the most recent appraised fair market value as necessary to meet certain liquidity requirements. The Amended Plan owns 4.4% of our outstanding common stock with a redemption value of $53 million as of December 27, 2005. The Redemption Right has never been exercised by the Amended Plan and we do not expect that it will be exercised in the immediate future. See Note 12 of the Notes to the Consolidated Financial Statements.    (3) Excludes future common stock repurchase obligations under our Stockholders Agreement with The Cypress Group as they are contingent upon certain events occurring which are not certain and cannot be estimated at this time.    (4) We have $2.7 million in letters of credit in order to cure a default of a portion of our debt with Textron.    (5) We have capital commitments at certain of our country clubs related to future construction or capital contributions after the developer has completed construction. Included in these capital commitments is $5 million which is reflected in our prepaids balance on our Consolidated Balance Sheet at December 27, 2005.    28    Table of Contents Factors That May Affect Future Operating Results  Enrollment and Retention of Members  Our success depends on our ability to attract and retain members at our clubs and maintain or increase usage of our facilities. Historically, we have experienced varying levels of membership enrollment and attrition rates and, in certain areas, decreased levels of usage of our facilities. Although we devote substantial efforts to ensuring that members and guests are satisfied, many of the factors affecting club membership and facility usage are beyond our control and there can be no assurance that we will be able to maintain or increase membership or facility usage. Significant periods where attrition rates exceed enrollment rates, or where facilities usage is below historical levels would have a material adverse effect on our business, operating results and financial position.  Changes in membership levels and facilities usage can be caused by a number of factors. In the past, federal tax law changes in the treatment of business entertainment and real estate expenses have adversely affected general industry demand and our membership and facilities usage. There can be no assurance that similar changes that would have an adverse effect on our revenues will not occur in the future. A substantial portion of our revenue is derived from discretionary or leisure spending by our members and guests and such spending can be particularly sensitive to changes in general economic conditions or changes in the federal tax laws. A significant adverse shift in general economic conditions, whether regional or national, would likely have a material adverse effect on our business, operating results and financial condition. Changes in consumer tastes and preferences, particularly those affecting the popularity of golf and private dining, and other social and demographic trends, could also have an adverse effect on us.  We have a program at our clubs targeted at decreasing our future attrition rate by increasing member satisfaction and usage. This program, known as Member Connect, takes a proactive approach to getting newly enrolled members involved in activities and groups that go beyond the physical club, in addition to granting new members a small number of vouchers for meals and other items in order to increase their familiarity with their club’s amenities. We believe that by aiding the process of assimilating new members into their clubs’ membership we will ultimately be able to reduce our attrition rate and achieve net gains in the number of members. However, there can be no assurance that this initiative will be successful or that the incremental costs of implementing such a program will not exceed its benefits.  Competition in Our Industry  The level of competition in our businesses varies from region to region and is subject to change as existing facilities are renovated or new facilities are developed. An increase in the number or quality of similar clubs and other facilities in a particular region could significantly increase competition, which could have a material adverse effect on our operations. Additionally, over the last decade, construction of public golf courses has accelerated significantly and we expect that, in the short to medium term, the increase in supply of public golf courses will exceed the increase in demand for such facilities. Our results of operations also could be affected by a number of additional competitive factors, including the availability of, and demand for, alternate forms of recreation. See Item 1 – “Business – Operations – Competition.”  Impairment of Assets  The Financial Accounting Standards Board (FASB) issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” in 2001 which requires, among other things, that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For the year ended December 27, 2005, we recorded impairment losses of $8.9 million relating to certain of our assets. This impairment loss is reported as a component of operating income (loss) in our Consolidated Statements of Operations. If events or circumstances change in the future, additional impairment losses could be recorded.  Our operations and ventures consist almost entirely of golf-related and business club facilities. Accordingly, we are subject to the risks associated with holding investments that are concentrated in two specific segments of the hospitality industry. A decline in the popularity of golf-related services or business club services, such as private dining, could adversely affect the value of our holdings, and could make it difficult to sell facilities. Our real estate holdings (including our long-term leaseholds) are subject to risks typically associated with investments in real estate. Investments in real estate are relatively non-liquid and, therefore, limit our ability to vary our portfolio of facilities in response to changes in industry and general economic conditions.    29    Table of Contents Environmental Regulation  We have policies in place designed to keep our facilities in compliance with current federal, state and local environmental laws and laws relating to access for disabled persons. We are not subject to any recurring costs associated with managing hazardous materials or pollution. We do not believe that we will incur expenses for infrequent or non-recurring cleanup, based upon our due diligence inspection, employee training, standards of operations and on-site assessments performed and maintained for each facility. However, some of our resorts and golf courses contain or have contained underground storage tanks, or USTs, for storing fuel. The majority of the USTs have been replaced with federal and state approved concrete lined steel, double walled aboveground tanks. We have less than ten USTs that we are currently in the process of replacing with above ground contained storage systems or retrofitting with the new detection and spill prevention equipment. We do not believe that any remediation will be required. We are permitted under various state laws to recover a portion of our costs of remediation through various state superfunds created to address environmental cleanups. We are not subject to any remediation mandates related to previously contaminated sites. See Item 1 — “Business — Operations — Government Regulation.”  Joint Ventures and Collaborative Agreements  We partially own 14 properties in partnership with other entities and may in the future enter into further joint venture or other collaborative arrangements related to additional properties. Our investments in these joint ventures may, under certain circumstances, involve risks not otherwise present in our business, including the risk that our partner may become bankrupt, the impact on our ability to sell or dispose of our property as a result of buy/sell rights that may be imposed by the joint venture agreement, and the risk that our partner may have economic or other interests or goals that are inconsistent with our interests and goals and that they may be in a position to veto actions which may be in our best interests.  Seasonality of Demand; Fluctuations in Quarterly Results  Our quarterly results fluctuate as a result of a number of factors. Usage of our country club and golf facilities and resorts declines significantly during the first and fourth quarters, when colder temperatures and shorter days reduce the demand for golf and golf-related activities. Our business clubs typically generate a greater share of their yearly revenues in the fourth quarter, which includes the holiday and year-end party season. In addition, the fourth quarter consists of 16 or 17 weeks of operations and the first, second and third fiscal quarters each consist of 12 weeks. As a result of these factors, we usually generate a disproportionate share of our revenues and cash flows in the second, third and fourth quarters of each year and have lower revenues and profits in the first quarter. The timing of purchases, sales, leases of facilities, or divestitures, has also caused and may cause our results of operations to vary significantly in otherwise comparable periods.  Our results can also be affected by non-seasonal and severe weather patterns. Periods of extremely hot, cold or rainy weather in a given region can be expected to reduce our golf-related revenue for that region. Similarly, extended periods of low rainfall can affect the cost and availability of water needed to irrigate our golf courses and can adversely affect results for facilities in the region effected. Keeping turf grass conditions at a satisfactory level to attract play on our golf courses requires significant amounts of water. Our ability to irrigate a course could be adversely impacted by a drought or other water shortage. A severe drought affecting a large number of properties could materially adversely affect our business and results of operations.  Conversely, floods caused by extreme rains may interrupt golf play at effected properties and result in property losses that may not be fully insured. We carry comprehensive liability, fire, flood and extended insurance coverage, as applicable, on all of our properties. We believe that that the policy specifications and insured limits are customary for similar properties and all of our existing golf clubs, resorts and business clubs are insured within industry standards. There are, however, losses of a catastrophic nature, such as those caused by wars, terrorist attacks or earthquakes, which may be either uninsurable or not economically insurable. Should an uninsured loss occur, we could lose both our invested capital in and anticipated profits from that property.  Inflation  Inflation has not had a significant impact on us. As operating costs and expenses increase, we generally attempt to offset the adverse effects of increased costs by increasing prices in line with industry standards. However, we are subject to the risks that our costs of operations will increase and we will be unable to offset those increases through increased dues, fees or room rates without adversely affecting demand. In addition to inflation, factors that could cause operating costs to rise include, among other things, increased labor costs, lease payments at our leased facilities, energy costs and property taxes.    30    Table of Contents Forward-Looking Statements  This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact should be considered “forward-looking statements” for purposes of these provisions, including statements that include projections of, or expectations about, earnings, revenues or other financial items, statements about our plans and objectives for future operations, statements concerning proposed new products or services, statements regarding future economic conditions or performance, statements concerning our expectations regarding the attraction and retention of members and guests, statements about market risk and statements underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “potential” or “continue,” or the negative thereof or other similar words. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we can give no assurance that such expectations or any of our forward-looking statements will prove to be correct. Actual results and developments are likely to be different from, and may be materially different from, those expressed or implied by our forward-looking statements. Forward-looking statements are subject to inherent risks and uncertainties, some of which are summarized in “Factors That May Affect Future Operating Results.”  Recently Issued Accounting Pronouncements  In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment,” which replaces SFAS No. 123, “Accounting for Stock-Based Compensation,” and supercedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS No. 123 (revised 2004) requires compensation costs related to share-based payment transactions to be recognized in the financial statements. With limited exceptions, the amount of compensation cost will be measured based on fair value on the grant date of the equity instruments issued or marked to market each period for the liability instruments issued. Compensation cost will be recognized over the period that an employee provides service for that award. This new standard will be effective for us beginning in our first quarter of 2006. We believe the impact of this standard will cause an increase to payroll expense of approximately $3.5 million ($2.3 million net of tax) for the year ending 2006.  In December 2004, the FASB issued SFAS No. 152, “Accounting for Real Estate Time-Sharing Transactions”, which clarifies accounting treatment for timeshare transactions and related costs. SFAS No. 152 is effective for fiscal years beginning after June 15, 2005. We do not believe the adoption of this statement will have a material effect on our Consolidated Financial Statements.  In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29”. SFAS No. 153 is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. APB Opinion No. 29, “Accounting for Nonmonetary Transactions,” provided an exception to its basic measurement principle (fair value) for exchanges of similar productive assets. Under APB Opinion No. 29, an exchange of a productive asset for a similar productive asset was based on the recorded amount of the asset relinquished. SFAS No. 153 eliminates this exception and replaces it with an exception of exchanges of nonmonetary assets that do not have commercial substance. We will apply the requirements of SFAS No. 153 on any future nonmonetary exchange transactions.  In March 2005, the FASB issued FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations” (FIN 47). FIN 47 addresses the recording and reporting of asset retirement obligations if removal of materials such as asbestos insulation, lead paint PCBs, or other material covered by environmental regulations, is required. The adoption of FIN 47 did not have an effect on our Consolidated Financial Statements.  In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections, a replacement of APB Opinion No. 29 and FASB Statement No. 3”. SFAS No. 154 requires retrospective application to prior periods’ financial statements of a voluntary change in accounting principle unless it is impracticable. APB Opinion No. 20 “Accounting Changes”, previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. We will apply the requirements of SFAS No. 154 on any future accounting changes or error corrections.    31    Table of Contents  Item 7A. Quantitative and Qualitative Disclosures about Market Risk  We are exposed to interest rate changes and foreign currency fluctuations. Variable interest rates on our refinanced mortgage debt are based on the 30-day LIBOR rate plus an incremental margin (between 275 and 375 basis points) and the U.S. Prime rate plus an incremental margin of 100 basis points. During 2005, the variable U.S. Prime rate related to these facilities averaged approximately 6.50%. At March 22, 2006, the 30-day LIBOR and U.S. Prime rates were 4.80% and 7.50%, respectively. Interest rate floors in place on these loans (4.25% and 5.75% for certain LIBOR-based loans and 5.00% for Prime-based loans, including applicable incremental margins) did not effect these market rates throughout fiscal year 2005. Interest payments on approximately 61% of the floating portion of these notes are protected by interest rate cap agreements that limit our exposure to rises in interest rates over certain amounts.  The table below presents the principal amounts, weighted average interest rates as of December 27, 2005 and fair values required by year of expected maturity to evaluate the expected cash flows and sensitivity to interest rate changes of our outstanding debt (dollars in thousands):                                      2006    2007    2008    2009    2010    Thereafter    Total     Fair Value   Fixed rate debt    $ 16,696    $ 14,016    $ 36,789    $ 10,849    $ 140,836    $ 215,775    $ 434,961     $ 450,845   Weighted average interest rate at December 27, 2005                                    6.83 %       Variable rate debt (primarily LIBOR)    $ 58,910    $ 12,446    $ 164,653    $ 61    $ 587    $ —      $ 236,657     $ 242,074   Weighted average interest rate at December 27, 2005                                    7.12 %                                                                  Totals    $ 75,606    $ 26,462    $ 201,442    $ 10,910    $ 141,423    $ 215,775    $ 671,618     $ 692,919                                                             A hypothetical one percent increase in short-term interest rates, based on the outstanding balance of our variable rate debt at December 27, 2005, would result in an estimated increase of $2.4 million in annual interest expense.  Because the table incorporates only those exposures that existed as of December 27, 2005, it does not consider those exposures or positions that could arise after that date. Moreover, the information presented herein has limited predictive value. As a result, our ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that arise during the period, our hedging strategies at that time and interest rates.  Changes in interest rates also impact our pension expense. An assumed discount rate is used in determining the present value of future cash outflows currently expected to be required to satisfy the pension benefit obligation when due. A hypothetical 25 basis points reduction in the assumed discount rate would result in an estimated increase of $0.7 million in our future pension expense.  Our objective in managing our exposure to foreign currency fluctuations is to reduce operating income and cash flow volatility associated with foreign exchange rate changes to allow management to focus its attention on our core businesses. We have historically managed this risk through the limited amount of our investments in foreign economies.   Item 8. Financial Statements and Supplementary Data  Our Consolidated Financial Statements and related notes begin on Page F-1 of this Annual Report on Form 10-K.   Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  None.    32    Table of Contents  Item 9A. Controls and Procedures  Evaluation of Disclosure Controls and Procedures  Our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this annual report. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our current disclosure controls and procedures were effective as of the end of the period covered by this report, in ensuring that all information required to be disclosed in reports we file or submit under the Securities Exchange Act of 1934 has been recorded, processed, summarized and reported within the time periods specified by the SEC.  Changes in Internal Controls  There has been no change in our internal control over financial reporting during the fourth quarter of 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.   Item 9B. Other Information  None.    33    Table of Contents  Part III   Item 10. Directors and Executive Officers of the Registrant  The following table sets forth information regarding our directors and executive officers as of March 24, 2006:             Name    Age     Position  Robert H. Dedman, Jr. (1) (2) (3)    48    Chairman of the Board      John A. Beckert (1) (2) (3)    52    Chief Executive Officer and President      Nancy M. Dedman    78    Director      Patricia Dedman Dietz    50    Director      James Stern (2) (3)    55    Director      Bahram Shirazi (2) (3)    42    Director      Jeffrey P. Mayer (1)    49    Chief Financial Officer      Thomas T. Henslee    46    Executive Vice President, Secretary and General Counsel      Richard N. Beckert    49    Executive Vice President, Operations      Frank C. Gore    56    Executive Vice President, Sales      Douglas T. Howe    48    Executive Vice President, Growth and Development      Murray S. Siegel    60    Executive Vice President, Strategic Operations    (1) Member of the Investment Committee    (2) Member of the Audit Committee    (3) Member of the Compensation Committee  Our board of directors is currently comprised of the Chairman of the Board and five other directors. In connection with the Stockholders Agreement, dated October 26, 1999 between The Cypress Group (“Cypress”) and certain stockholders affiliated with the Dedman family (the “Dedman Stockholders”), Cypress is entitled to designate two directors to serve on our Board. James Stern and Bahram Shirazi currently serve on the Board as representatives of Cypress. Cypress has a right to designate two directors as long as it owns 50% or more of the common stock it purchased from the Dedman Stockholders, pursuant to a Stock Purchase Agreement, dated October 26, 1999, executed in connection with the Stockholders Agreement, and at least one director as long as it owns at least 25% of such common stock. The Dedman Stockholders also have the right to appoint one additional non-employee director, as specified in the Stockholders Agreement. All employee directors, the Chairman of the Board and Nancy Dedman hold office until the next annual meeting of stockholders and until their successors have been duly elected and qualified. Our executive officers are elected by the Board and serve until their successors are duly elected and qualified.  Committees of the Board of Directors  Investment: Our Investment Committee consists of three executive officers and has been delegated the authority by our Board for a variety of matters, including the authority to approve certain acquisitions, dispositions, and expansion and development projects. Where our Board desires to delegate certain authority to the Investment Committee and applicable law prevents the delegation of such authority to a committee that includes persons in addition to directors, the authority is exclusively delegated to the directors who are members of the Investment Committee.  Audit: Our Audit Committee consists of four directors, two of which are non-employees. The Board of Directors has not designated an audit committee financial expert. However, the Board has reviewed the qualifications of the members of the Audit Committee and believes that our Audit Committee members possess the necessary financial background and experience required to effectively perform all of their required duties.  Compensation: Our Compensation Committee consists of two employee directors and two non-employee directors and is responsible for establishing the compensation of our directors and executive officers. We generally hire an independent third party to provide our Compensation Committee information and recommendations on compensation for our executive officers. Our Compensation Committee uses that information to make recommendations to our Board of Directors.    34    Table of Contents Under the terms of the Stockholders Agreement, as long as Cypress is entitled to designate one director to our Board, the Audit and Compensation Committees of the Board must include at least one representative of Cypress.  Directors  Robert H. Dedman, Jr., age 48, joined us in 1980 and served as Director of Corporate Planning from 1980 until 1984. From 1984 until 1987, Mr. Dedman was an associate at Salomon Brothers Inc., specializing in mergers and acquisitions. Mr. Dedman returned to us in 1987 as Chief Financial Officer. Since 1989, Mr. Dedman has served as a director of ClubCorp and in August 2002 became our Chairman of the Board. Mr. Dedman served as our Chief Operating Officer from 1989 through 1997, as our President from 1989 through August 2002 and as Chief Executive Officer from 1998 through 2004. Mr. Dedman is a director of Southern Methodist University Dedman School of Law, JPMorgan Chase Dallas Region, and the University of Texas Development Board. Mr. Dedman is an executive board member of Golf 20/20, a national trustee in the southwest of the Boys & Girls Clubs of America, a trustee of the Southwestern Medical Foundation and Dallas Museum of Art, and past chairman of the Texas Business Hall of Fame.  John A. Beckert, age 52, joined us in August 2002 as President and Chief Operating Officer and in 2004 became Chief Executive Officer. Mr. Beckert, who has 23 years of experience in the hospitality industry, is also a member of our board of directors. From 2000 to 2002, Mr. Beckert was a partner in Seneca Advisors LLP, a consulting and private investment firm. Prior to 2000, Mr. Beckert served 19 years at Bristol Hotels and Resorts, most recently as President and Chief Operating Officer. John is a life board member of the North Texas Food Bank and former chairman of the board of trustees of Greenhill School in Dallas.  Nancy M. Dedman, age 78, was appointed to our board of directors in August 2002. Mrs. Dedman previously served as a director of our predecessor, ClubCorp International, Inc., from its inception until 1998.  Patricia Dedman Dietz, age 50, has been one of our directors since 1982. Mrs. Dietz spent 15 years in private practice as a psychologist.  James Stern, age 55, was elected as one of our directors in 2006 and has been the CEO and Chairman of The Cypress Group since its formation in April 1994. Prior to joining Cypress, Mr. Stern was a managing Director with Lehman Brothers, Inc. and served as head of the Merchant Banking Group. During his career at Lehman Brothers, he also served as head of that firm’s Investment Banking, High Yield and Primary Capital Markets Groups. Mr. Stern is also a Director of AMTROL, Inc., WESCO International, Lear Corporation, Medpointe, Inc., and Affinia Group, Inc., and is Chairman of the Board of Trustees of Tufts University.  Bahram Shirazi, age 42, was elected as one of our directors in 1999, and has been a Managing Director of The Cypress Group, a private merchant banking firm, since 1998. Prior to 1998, he was a Principal at Cypress since its formation in 1994. Prior to joining Cypress, he was a Vice President in the Merchant Banking Group at Lehman Brothers Inc.  Executive Officers  Jeffrey P. Mayer, age 49, joined us in 2000 as Chief Financial Officer. Previously, Mr. Mayer served in various senior management positions with Bristol Hotels and Resorts from 1996 to 2000, most recently as Executive Vice President and Chief Financial Officer. Prior to that time, Mr. Mayer served as Senior Vice President, Corporate Controller and Chief Accounting Officer of Host Marriott Corporation (formerly Marriott Corporation).  Thomas T. Henslee, age 46, has been our General Counsel, Executive Vice President and Secretary since 2003. Mr. Henslee was a Partner with the firm Henslee and Cassidy LLP, which began representing our subsidiaries in daily operational matters in 1996. Previously, Mr. Henslee represented us in numerous matters beginning in 1989.  Richard N. Beckert, age 49, is Executive Vice President, Operations. Mr. Beckert joined ClubCorp in 2002 as Senior Vice President of Human Resources and later served as Executive Vice President, Resorts. Previously, Mr. Beckert served as CEO of Malibu Entertainment Worldwide and the Chief Administrative Officer for Bristol Hotels and Resorts.  Frank C. Gore, age 56, joined us in 1978 and since that time has held various positions and offices with us. Mr. Gore was promoted to Executive Vice President of ClubCorp USA, Inc. in 1987.    35    Table of Contents Douglas T. Howe, age 48, joined us in 1975 and has served in various positions and offices related to our operations and business development in that time. Mr. Howe was promoted to Executive Vice President of ClubCorp USA, Inc. in 1995.  Murray S. Siegel, age 60, is Executive Vice President, Strategic Operations. Mr. Siegel joined ClubCorp in 1978 and has held various positions and offices with us. Mr. Siegel was promoted to Executive Vice President of ClubCorp USA, Inc. in 1999.  Robert H. Dedman, Jr. and Patricia Dedman Dietz are siblings and are the children of Nancy M. Dedman. Richard N. Beckert is the brother of John A. Beckert.  Code of Ethical Conduct for Financial Managers  We have adopted a code of ethics for financial professionals, or code, as required by the SEC, under Section 406 of the Sarbanes-Oxley Act of 2002. The code sets forth written standards that are designed to deter wrongdoing and to promote honest and ethical conduct by the Company’s senior financial officers, including its Chief Executive Officer, and is a supplement to our Code of Conduct and the other policies and procedures that govern the conduct of our employees. In addition to applying to our Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, this code applies to all of the other persons employed by us who have significant responsibility for preparing or overseeing the preparation of the Company’s financial statements and the other financial data included in our periodic reports filed with the SEC and in other public communications made by us that are designated from time to time by the Chief Financial Officer as senior financial professionals.  Section 16(a) Beneficial Ownership Reporting Compliance  We do not have equity securities registered pursuant to Section 12 of the Securities Exchange Act of 1934. As a result, the reporting and other requirements of Section 16 of the Securities Exchange Act of 1934 do not apply to us.    36    Table of Contents  Item 11. Executive Compensation  Summary Compensation Table  The following table sets forth the compensation paid to our Chief Executive Officer and our four other most highly compensated executive officers as of December 27, 2005 (collectively, the “Named Executive Officers”) during the years ended December 30, 2003, December 28, 2004 and December 27, 2005:                          Annual Compensation    Long-TermCompensation   Name and Principal Position    Year    Salary    Bonus     Other Annual Compensation (1)    Securities UnderlyingOptions (2)   Robert H. Dedman, Jr.Chairman of the Board    200520042003    $   515,000506,346500,000    $   257,500283,554235,000    $   —  —  —      —  —  —            John A. BeckertPresident, Chief Executive Officer and Director    200520042003        575,000531,731500,000        287,500322,000281,250        —  —  —      —  350,000925,000          Jeffrey P. MayerChief Financial Officer    200520042003        364,521354,442343,539        227,010225,607226,433        —  —  —      137,520—  286,500          Richard N. BeckertExecutive Vice President, Operations    200520042003        390,482315,538286,538        234,794207,332230,541        —  —  —      125,000225,000250,000          Douglas T. HoweExecutive Vice President, ClubCorp USA, Inc.    200520042003        286,194280,069264,339        192,855147,377148,781        —  —  —      13,180—  186,800    (1) There was no other annual compensation, perquisites and other personal benefits, securities or property greater than either $50,000 or 10% of the total annual salary and bonus or other annual compensation reported for each Named Executive Officer in 2003, 2004 or 2005.    (2) Reflects options to acquire our common stock granted pursuant to the ClubCorp Omnibus Stock Plan (the “Omnibus Stock Plan”).    37    Table of Contents Option Grants in Last Fiscal Year Table  The following table summarizes for each Named Executive Officer, each grant of stock options during the fiscal year ended December 27, 2005.                          Individual Grants   Name    Number ofSecuritiesUnderlyingOptionsGranted    Percent ofTotalOptionsGranted toEmployees inFiscal Year     ExercisePrice    ExpirationDate     Grant Date Fair Value (1)   Robert H. Dedman, Jr.    —      —         —      —        —     John A. Beckert    —      —         —      —        —     Jeffrey P. Mayer    37,520    4.06 %   $ 12.50    6/1/15    $ 226,246      100,000    10.83       12.91    11/10/15      643,000   Richard N. Beckert    37,520    4.06       12.50    6/1/15      226,246      87,480    9.47       12.91    11/28/15      558,997   Douglas T. Howe    13,180    1.43       12.50    6/1/15      79,475    (1) Fair value was calculated using the Black-Scholes option pricing model. Use of this model should not be viewed in any way as a forecast of the future performance of our common stock, which will be determined by future events and unknown factors. The estimated values under the Black-Scholes model are based upon the following assumptions: risk free rate of return (varies depending on grant date), stock price volatility (40%), dividend yield (0), term (7 years) and forfeiture rate (3%).  Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values  The following table summarizes for each Named Executive Officer, each exercise of stock options during the fiscal year ended December 27, 2005 and the fiscal year-end value of unexercised options:                                       Number of Shares of Common Stock Underlying UnexercisedOptions at Fiscal Year-End (1) (2)     Value of Unexercised In-the-Money Options at Fiscal Year-End (3)   Name    SharesAcquiredon Exercise    ValueRealized    Exercisable    Unexercisable    Exercisable    Unexercisable   Robert H. Dedman, Jr.    —      $ —      847,200    46,800    $ 1,090,508    $ 25,272   John A. Beckert    —        —      440,000    835,000      1,701,900      2,820,850   Jeffrey P. Mayer    —        —      277,500    193,020      923,655      163,658   Richard N. Beckert    —        —      145,000    455,000      494,900      917,483   Douglas T. Howe    —        —      211,550    29,680      694,396      18,769    (1) The ClubCorp Inc. Executive Stock Option Plan (the Executive Option Plan) was adopted in August 1995 and was amended and restated effective January 2001. The Executive Option Plan provides for granting options to purchase shares of common stock to key employees at a price not less than fair market value at the date of grant. The options vest evenly over a 10 year period from the date the option is granted, if the employee maintains a certain performance level as defined in the Executive Option Plan. Each of the Named Executive Officers met the required performance level defined in the Executive Option Plan for 2003, 2004, and 2005. Thus, 100% of the shares granted are vested and exercisable, dependent upon the year of grant.    (2) The Omnibus Stock Plan was adopted effective February 1998 and was amended and restated effective January 2001. The Omnibus Stock Plan provides for granting to key employees options to purchase shares of common stock at a price not less than fair market value at the date of grant. The vesting is determined at the time of grant and is generally three to five years with a ten-year expiration date with one exception. During the year ended December 30, 2003, we allowed employees with options in the company granted before January 1, 2002, to forfeit those options and be issued the same number of options six months and several days later at the then current stock price. On September 19, 2003, 3,153,086 options were granted related to this transaction. These options have an 18-month cliff vesting with a seven-year expiration date.    (3) Based upon the most recent appraised value of $12.91 per share.    38    Table of Contents Compensation of Directors  Directors who are not officers of ClubCorp receive reimbursement of travel expenses for each of our Board meetings attended.  Employment Agreements; Key-Man Life Insurance  We do not have non-disclosure and non-competition agreements with the majority of our salaried employees, excluding our senior executive officers. In addition, we do not maintain key-man life insurance policies on any of our officers or employees.  With the exception of John A. Beckert, our President and Chief Executive Officer, Richard N. Beckert, our Executive Vice President, Operations, and Jeffrey P. Mayer, our Chief Financial Officer, we generally do not have any employment agreements with our Named Executive Officers or employees.  Compensation and Benefits. Under their employment agreements, Mr. John A. Beckert, Mr. Richard N. Beckert and Mr. Mayer are entitled to annual base salaries of $575,000, $420,000 and $370,000, respectively. Each executive’s annual base salary is reviewed at least annually and may be increased at the discretion of the Compensation Committee of the Board of Directors. In addition, they are eligible to receive an annual cash bonus payment based upon their performance as measured against the financial and personal performance objectives set forth in our ClubCorp Incentive Plan for Home Office and Division Employee Partners.     39    Table of Contents Several of the material clauses of the employment agreements for John Beckert, Richard Beckert and Jeffrey Mayer are similar and are summarized below:  Effect of Termination. Under the employment agreements, if employment is terminated by us other than for Cause (as defined in the employment agreements), death or disability or if they resign their employment for Good Reason (as defined in the employment agreement), then:        •   all unvested stock options will be automatically vested effective on the day immediately preceding the termination date; and        •   contingent on signing and delivering a general release and waiver of claims in a form reasonably acceptable to us, they will also receive eighteen (18) months of base salary (24 months for John Beckert) and an additional amount equal to the annual bonus he received in the preceding calendar year.  Effect of a Change of Control. In the event of a Change of Control (as defined in the employment agreements), all of their vested and unvested stock options will be deemed to have automatically vested on the date immediately prior to the date of the Change of Control. If (i) any payments are due and are subject to excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended from time to time, or any successor provision or (ii) they are subject to a “parachute payment” and such payment is reduced, we will pay them an additional amount so that the net amount retained by them after deductions of any such excise tax and any income and employment taxes, social security tax, excise tax, interest or penalties imposed on such amounts paid shall be equal to the full amount of the intended payment or benefit.  Other Protective Provisions. Under the employment agreements, they are subject to certain non-solicitation, confidentiality, inventions and works for hire, non-competition and non-disparagement provisions.  Compensation Committee Interlocks and Insider Participation  During 2005, Messrs. Dedman, Beckert, James Singleton (a former director) and Shirazi served as members of our compensation committee. Mr. Dedman serves as our Chairman of the Board and Mr. Beckert serves as our Chief Executive Officer and President. In addition, Mr. Singleton was President of Cypress and Mr. Shirazi is a Managing Director of Cypress. Cypress beneficially owns greater than 10% of our common stock. No member of the compensation committee serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation committee.  In January of 2006, James Singleton resigned from our board of directors and the compensation committee. James Stern, CEO and Chairman of the Board of Cypress, has been appointed as Mr. Singleton’s replacement. He will serve on our board of directors and the compensation committee in the same capacity as Mr. Singleton had previously.    40    Table of Contents  Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters  Equity Compensation Plan Information  The following table sets forth certain information regarding our equity compensation plans as of December 27, 2005:  Equity Compensation Plan Information                      (a)    (b)    (c)    (d)   Plan Category    Number ofSecurities to beIssued UponExercise ofOutstandingOptions,Warrants andRights    WeightedAverage ExercisePrice ofOutstandingOptions,Warrants andRights (3)    Number ofSecuritiesRemainingAvailable forFuture IssuanceUnder EquityCompensationPlans (ExcludingSecuritiesReflected inColumn (a))    Total of SecuritiesReflected inColumns (a) and (c)   Equity Compensation Plans Approved by Shareholders (1) (2)    7,557,513    $ 10.52    879,349    8,436,862   Equity Compensation Plans Not Approved by Shareholders    —        —      —      —                             Total    7,557,513    $ 10.52    879,349    8,436,862                            (1) Includes outstanding options under the Executive Stock Option Plan, which was adopted by our Board in August 1995 and was amended and restated effective January 2001. We do not intend to issue new grants under this plan.    (2) Includes outstanding options under the Omnibus Stock Plan, which was adopted by our Board in February 1998. After several amendments, the Plan now has 7,638,862 shares authorized and included in the total securities above.    (3) Based upon the weighted-average fair market value as determined by the most recent appraisal value available at the respective grant dates.    41    Table of Contents Security Ownership of Certain Beneficial Owners and Management  The following table sets forth certain information concerning the beneficial ownership of our common stock, as of March 24, 2006, by (i) each Named Executive Officer, (ii) each person or group known by us to be the beneficial owner of more than 5.0% of the outstanding common stock, (iii) each of our directors and (iv) all of our directors and executive officers as a group. The number and percentage of shares of common stock beneficially owned is determined under the rules of the SEC and is not necessarily indicative of beneficial ownership for any other purpose. Under these rules, beneficial ownership includes any shares for which a person has sole or shared voting power or investment power and also any shares of common stock underlying stock options and warrants that are exercisable by that person within sixty days of March 24, 2006. However, shares underlying such stock options and warrants are not treated as outstanding for the purpose of computing the percentage ownership of any other person or entity. Unless otherwise indicated in the footnotes, each person listed in the following table has sole voting and investment power over the shares shown as beneficially owned by that person. Percentage of beneficial ownership is based on 92,821,459 shares of common stock outstanding as of March 24, 2006.                 Shares of Common StockBeneficially Owned   Name    Number    Percentage   Robert H. Dedman, Jr. (1) (3)    49,855,534    53.2       Nancy M. Dedman (1) (4)    40,243,960    43.4       The Cypress Group (2) (5)    15,075,000    16.1       James Stern (2) (5)    15,075,000    16.1       Patricia Dedman Dietz (1) (6)    12,825,308    13.8       Bahram Shirazi (2) (7)    —      *       John A. Beckert (1) (8)    658,389    *       Richard N. Beckert (1) (9)    195,998    *       Jeffrey P. Mayer (1) (10)    296,800    *       Douglas T. Howe (1) (11)    244,755    *       All directors and executive officers as a group (12 persons) (12)    83,623,316    86.7    * less than 1.0%    (1) Such person’s address is 3030 LBJ Freeway, Suite 700, Dallas, Texas 75234.    (2) Such entity’s or person’s address is 65 East 55th Street, New York, New York 10022.    (3) Includes 12,018,900 shares owned by trusts for the benefit of Robert H. Dedman, Jr. (JPMorgan Chase Bank is the trustee of 5,191,526 of these shares and may be deemed to beneficially own these 5,191,526 shares. JPMorgan Chase Bank disclaims such beneficial ownership.), 17,470,337 shares owned by the estate of Robert H. Dedman, Sr., 16,000,000 shares owned by a trust for the benefit of Nancy M. Dedman which Robert H. Dedman, Jr. is a trustee and has sole voting power, 1,264,761 shares owned by trusts for which Robert H. Dedman, Jr. and Nancy M. Dedman are trustees and share voting power, 1,463,130 shares owned by a trust for the benefit of Nancy M. Dedman, Robert H. Dedman, Jr. and Patricia Dedman Dietz for which Robert H. Dedman, Jr. is a trustee and has sole voting power, 16,948 shares owned by Robert H. Dedman, Jr.’s wife, Rachael Dedman, 19,649 shares owned by trusts for the benefit of Robert H. Dedman, Jr.’s minor children for which Mr. Dedman, Jr. is a trustee and shares voting and investment power, 723,409 shares owned by Robert H. dedman, Jr. and 878,400 shares of common stock issuable upon exercise of options that may be exercised within 60 days of March 24, 2006. Excludes 12,113,200 shares owned by trusts for the benefit of Patricia Dedman Dietz and 85,388 shares owned by trusts for the benefit of the Dietz’s minor children for which Robert H. Dedman, Jr. serves as a trustee and shares voting and investment power. Pending administration and distribution of Mr. Dedman, Sr.’s estate, Robert H. Dedman, Jr. and Nancy M. Dedman, as the executors of the estate, may be deemed to have shared voting power with respect to the shares beneficially owned by the estate.    (4) Includes 17,470,337 shares owned by the estate of Robert H. Dedman, Sr., 17,448,498 shares owned by trusts for the benefit of Nancy M. Dedman which Robert H. Dedman, Jr. is a trustee and has sole voting power, 1,264,761 shares owned by trusts for which Robert H. Dedman, Jr. and Nancy M. Dedman are trustees and share voting power and 4,060,364 shares owned by Nancy M. Dedman. Pending administration and distribution of Mr. Dedman, Sr.’s estate, Robert H. Dedman, Jr. and Nancy M. Dedman, as the executors of the estate, may be deemed to have shared voting power with respect to the shares beneficially owned by the estate.    (5) Includes 11,880,303, 1,485,557, 114,646, 505,051, and 76,943 shares owned by Cypress Merchant Banking Partners II L.P., Cypress Merchant Banking Partners L.P., 55th Street Partners II L.P., Cypress Golf C.V. Ltd. and Cypress Golf Ltd., respectively. Includes 855,563, 107,325, 8,100, 36,450, and 5,062 shares of common stock issuable upon exercise of stock warrants that may be exercised within 60 days of March 24, 2006 to Cypress Merchant Banking Partners II L.P., Cypress Merchant Banking Partners L.P., 55th Street Partners II L.P., Cypress Golf C.V. Ltd. and Cypress Golf Ltd., respectively. James Stern is a member of The Cypress Group which exercises voting control over the shares.    (6) Includes 12,113,200 shares owned by trusts for the benefit of Patricia Dedman Dietz (JPMorgan Chase Bank is the trustee of 5,285,826 of these shares and may be deemed to beneficially own these 5,285,826 shares. JPMorgan Chase Bank disclaims such beneficial ownership.), 85,388 shares owned by trusts for the benefit of Patricia Dedman Dietz’s minor children for which Mrs. Dietz is a trustee and shares voting power, 7,316 shares owned by a trust for the benefit of Patricia Dedman Dietz which Robert H. Dedman, Jr. is a trustee and has sole voting power and 619,404 shares owned by Patricia Dedman Dietz. Excludes 12,018,900 shares owned by trusts for the benefit of Robert H. Dedman, Jr., for which Mrs. Dietz is a trustee and shares voting and investment power.    (7) Bahram Shirazi is a member of The Cypress Group who does not exercise voting control over the shares.    (8) Includes 655,000 shares of common stock issuable upon exercise of options that may be exercised within 60 days of March 24, 2006.    (9) Includes 195,000 shares of common stock issuable upon exercise of options that may be exercised within 60 days of March 24, 2006.    (10) Includes 286,800 shares of common stock issuable upon exercise of options that may be exercised within 60 days of March 24, 2006.    (11) Includes 219,800 shares of common stock issuable upon exercise of options that may be exercised within 60 days of March 24, 2006.    (12) Includes 3,639,400 shares of common stock issuable upon exercise of options that may be exercised within 60 days of March 24, 2006 for our executive officers and directors.    42    Table of Contents The estate of Robert H. Dedman, Sr. and his family currently own approximately 71% of our common stock. The holders of a majority of the common stock can elect all of our directors and approve or disapprove certain fundamental corporate transactions, including a merger or sale of all of our assets, subject to the terms of the Stockholders Agreement. The transfer of a substantial portion of the common stock owned by Nancy M. Dedman, or by her children could result in a change in our control and could affect our management or future direction. In addition, as defined by Section 182 of the Internal Revenue Code, a change in control of our greater than 5% stockholders could limit our ability to utilize current net operating losses to offset future taxable income.   Item 13. Certain Relationships and Related Transactions  During 1999, we sold 9,375,000 shares of common stock and warrants to acquire 1,012,500 shares of common stock to The Cypress Group. Beginning in December 2004, we are obligated under certain defined conditions to offer to repurchase a portion of their outstanding shares if we are below a defined leverage ratio. Based on the calculation, we were above the stated leverage ratio and were not required to offer to repurchase any shares during 2005.   Item 14. Principal Accountant Fees and Services  The table below sets forth the aggregate fees billed by our principal independent registered public accountants for audit, audit-related and tax services provided to us in each of the last two fiscal years. Deloitte & Touche LLP was our principal independent registered public accountant in 2004 and 2005.                   2004    2005   Audit fees    $ 532,000    $ 767,000   Audit-related Fees (1)      84,000      62,000   Tax fees      —        —     All other fees      —        —                     Total fees    $ 616,000    $ 829,000                    (1) Audit related fees consist principally of fees for audits of financial statements of certain employee benefit plans and Sarbanes-Oxley compliance.  The Audit Committee pre-approves all services performed by our independent registered public accounting firm.    43    Table of Contents  Part IV   Item 15. Exhibits and Financial Statement Schedules      (a)(1) The following audited Consolidated Financial Statements of ClubCorp and our subsidiaries as of December 28, 2004 and December 27, 2005, and for the years ended December 30, 2003, December 28, 2004, and December 27, 2005 are included in this Annual Report on Form 10-K, beginning on Page F-1:  Reports of Independent Registered Public Accounting Firms  Consolidated Balance Sheets  Consolidated Statements of Operations  Consolidated Statements of Stockholders’ Equity and Comprehensive Loss  Consolidated Statements of Cash Flows  Notes to Consolidated Financial Statements      (a)(2) All schedules are omitted as the required information is inapplicable or the information is presented in the Consolidated Financial Statements or the Notes thereto.      (a)(3) Exhibits 10.2 and 10.3, 10.7 through 10.10, 10.17, 10.22 and 10.25 through 10.30 are compensatory plans. See Index to Exhibits on page 46  Supplemental Information  We have not furnished to our security holders an annual report covering our last fiscal year or any proxy statement, form of proxy or other proxy soliciting material with respect to any annual or other meeting of security holders other than a proxy for the election of officers and directors at the annual shareholders meeting if the security holder did not plan to attend, which will be furnished to security holders subsequent to the filing of this annual report.    44    Table of Contents SIGNATURES  Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.           CLUBCORP, INC.     By:    /s/ John A. Beckert     John A. Beckert     President and     Chief Executive Officer     By:    /s/ Jeffrey P. Mayer     Jeffrey P. Mayer     Chief Financial Officer     By:    /s/ Angela A. Stephens     Angela A. Stephens      Senior Vice President and Chief Accounting Officer     Date:   March 24, 2006    45    Table of Contents Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:             Signature     Title    Date       * Robert H. Dedman, Jr.    Chairman of the Board   March 24, 2006       * John A. Beckert    President, Chief Executive Officer, and Director   March 24, 2006       * Nancy M. Dedman    Director   March 24, 2006       * Patricia Dedman Dietz    Director   March 24, 2006       * James Stern    Director   March 24, 2006       * Bahram Shirazi    Director   March 24, 2006          By:    /s/Angela A. Stephens     Angela A. Stephens     Attorney-in-Fact    * Power of Attorney authorizing Angela A. Stephens to sign this annual report on Form 10-K on behalf of the directors and certain officers of the Company is filed with the Securities and Exchange Commission. See the Power of Attorney on the Index to Exhibits, exhibit 24.1.    46    Table of Contents INDEX TO EXHIBITS          ExhibitNumber    Exhibit  3.1*   Articles of Incorporation, as amended, of ClubCorp, Inc.     3.2*   Bylaws, as amended, of Club Corporation International     4.1*   Specimen Certificate evidencing Common Stock of Club Corporation International     4.2~~   Certificate of Incorporation of ClubCorp, Inc.     4.3**   Bylaws of ClubCorp, Inc.     10.1*   Form of Stockholder Agreement for Club Corporation International     10.2~   ClubCorp Employee Stock Ownership Trust     10.3~   First Amendment to the ClubCorp Employee Stock Ownership Trust     10.4##   Stock Purchase Agreement among ClubCorp, Inc., the Dedman Family and The Cypress Group, L.L.C. dated October, 1999     10.5##   Stockholders Agreement among ClubCorp, Inc., the Dedman Family and The Cypress Group, L.L.C. dated October 26, 1999     10.6##   Form of Warrant to Purchase Common Stock of ClubCorp, Inc.     10.7%   Restated ClubCorp, Inc. Executive Stock Option Plan     10.8%%   Second Amendment to ClubCorp Employee Stock Ownership Trust     10.9+   Third Amendment to ClubCorp Employee Stock Ownership Trust     10.10+   2002 ClubCorp Comprehensive Compensation Plan     10.11++   Loan Agreement dated June 2, 2003 between Timarron Golf Club, Inc., Crow Canyon Management Corp., Northwood Management Corp. and Treesdale Country Club, Inc. and GMAC Commercial Mortgage Corporation     10.12++   Loan Agreement dated June 2, 2003 between Diamond Run Club, Inc., Greenbrier Country Club, Inc., Shadow Ridge Golf Club, Inc., Bay Oaks Country Club, Inc. and Woodside Plantation Country Club, Inc. and GMAC Commercial Mortgage Corporation     10.13++   Loan Agreement by and between Pacific Life Insurance Company and The Country Club Loan Parties Named herein dated as of June 2, 2003     10.14++   Loan Agreement by and between Pacific Life Insurance Company and The Resort Loan Parties Named herein dated as of June 2, 2003     10.15++   Loan Agreement dated June 4, 2003 between Textron Financial Corporation, ClubCorp, Inc., and each of the undersigned affiliates of ClubCorp     10.16++   Form of Promissory Note between Knollwood Country Club, Inc. and Textron Financial Corporation dated June 4, 2003     10.17+++   First Amendment to the ClubCorp, Inc. Executive Stock Option Plan     10.18^^   First Amendment to the Loan Agreement between Textron Financial Corporation, ClubCorp, Inc., and each of the undersigned affiliates of ClubCorp     10.19^^^   Employment Agreement between ClubCorp, Inc. and Richard N. Beckert, effective July 1, 2004     10.20^^^   Letter from KPMG LLP Regarding Change in Certifying Accountant     10.21<   Employment Agreement between ClubCorp, Inc. and Jeffrey P. Mayer     10.22<<   ClubCorp, Inc. Deferred Compensation Plan     10.23   Amended and Restated Employment Agreement between ClubCorp, Inc. and John A. Beckert     10.24   ClubCorp Incentive Plan for Home Office and Division Employee Partners - 2005     10.25   Fourth Amendment to the ClubCorp Employee Stock Ownership Trust     10.26   Restated ClubCorp, Inc. Omnibus Stock Plan     10.27   Restated ClubCorp Employee Stock Ownership Plan     10.28   First Amendment to the ClubCorp Employee Stock Ownership Plan     10.29   Second Amendment to the ClubCorp Employee Stock Ownership Plan     10.30   Third Amendment to the ClubCorp Employee Stock Ownership Plan     14^^^   Code of Ethical Conduct for Financial Managers     21.1   Subsidiaries of ClubCorp, Inc.     23.1   Consent of KPMG LLP     23.2   Consent of Houlihan Lokey Howard and Zukin Financial Advisors, Inc.     23.3   Consent of Deloitte & Touche LLP     24.1   Power of Attorney     31.1   Certification by John A. Beckert pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.     31.2   Certification by Jeffrey P. Mayer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.    47    Table of Contents          32.1   Certification by John A. Beckert pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.     32.2   Certification by Jeffrey P. Mayer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.    * Incorporated by reference to our Registration Statement on Form S-1 (Registration No. 33-83496)    ** Incorporated by reference to our Post-Effective Amendment No. 1 to Form S-8 (Registration Nos. 33-89818, 33-96568, 333-08041, 333-57107 and 333-52612)    ~ Incorporated by reference to our Annual Report on Form 10-K for the fiscal year ended December 29, 1998    ~~ Incorporated by reference to our Quarterly Report on Form 10-Q for the fiscal period ended March 23, 1999    ## Incorporated by reference to our Annual Report on Form 10-K for the fiscal year ended December 28, 1999    % Incorporated by reference to our Quarterly Report on Form 10-Q for the fiscal period ended September 4, 2001    %% Incorporated by reference to our Quarterly Report on Form 10-Q for the fiscal period ended March 19, 2002    + Incorporated by reference to our Annual Report on Form 10-K for the fiscal year ended December 31, 2002    ++ Incorporated by reference to our Quarterly Report on Form 10-Q for the fiscal period ended June 17, 2003    +++ Incorporated by reference to our Quarterly Report on Form 10-Q for the fiscal period ended September 9, 2003    ^^ Incorporated by reference to our Quarterly Report on Form 10-Q for the fiscal period ended June 15, 2004    ^^^ Incorporated by reference to our Annual Report on Form 10-K for the fiscal year ended December 28, 2004    < Incorporated by reference to our Quarterly Report on Form 10-Q for the fiscal period ended March 22, 2005    << Incorporated by reference to our Quarterly Report on Form 10-Q for the fiscal period ended June 14, 2005    48    Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  To the Board of Directors and Stockholders of  ClubCorp, Inc.  Dallas, Texas  We have audited the accompanying consolidated balance sheets of ClubCorp, Inc. and subsidiaries (the “Company”) as of December 27, 2005 and December 28, 2004, and the related consolidated statements of operations, stockholders’ equity and comprehensive income (loss), and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.  In our opinion, such 2005 and 2004 consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 27, 2005 and December 28, 2004, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.        /s/ DELOITTE & TOUCHE LLP    Dallas, Texas  March 24, 2006    F-1    Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  The Board of Directors and Stockholders  ClubCorp, Inc.:  We have audited the accompanying consolidated statements of operations, stockholders’ equity and comprehensive income (loss), and cash flows of ClubCorp, Inc. and subsidiaries (ClubCorp) for the year ended December 30, 2003. These consolidated financial statements are the responsibility of ClubCorp’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.  We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.  In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and the cash flows of ClubCorp, Inc. and subsidiaries for the year ended December 30, 2003, in conformity with U.S. generally accepted accounting principles.        /s/ KPMG LLP    Dallas, Texas  March 29, 2004, except for  Note 11 which is as of April 12, 2005    F-2    Table of Contents ClubCorp, Inc.    Consolidated Balance Sheets  Years ended December 28, 2004 and December 27, 2005  (Dollars in thousands)                      2004     2005     Assets              Current assets:              Cash and cash equivalents    $ 96,180     $ 188,675     Restricted cash      28,742       21,650     Membership and other receivables, net      71,372       72,616     Inventories      19,807       19,106     Prepaid expenses and other assets      29,387       29,061                        Total current assets      245,488       331,108     Property and equipment, net      1,141,584       1,124,761     Notes receivable      43,436       33,256     Other assets      87,477       58,582                        Total assets    $ 1,517,985     $ 1,547,707                        Liabilities and Stockholders’ Equity               Current liabilities:              Accounts payable and accrued liabilities    $ 79,847     $ 87,274     Long-term debt - current portion      23,220       75,604     Membership deposits - current portion      16,940       18,341     Other liabilities      129,907       120,925                        Total current liabilities      249,914       302,144         Long-term debt, net of current portion      684,613       596,014     Other liabilities      139,622       128,385     Membership deposits, net of current portion      136,776       151,273                        Total liabilities      1,210,925       1,177,816     Redemption value of common stock held by benefit plan      47,180       53,026         Commitments and contingencies                  Stockholders’ equity:              Preferred stock, $.01 par value, 150,000,000 shares authorized, none issued or outstanding      —         —       Common stock, $.01 par value, 250,000,000 shares authorized, 99,594,408 issued, 93,380,242 outstanding at December 28, 2004 and 92,821,459 at December 27, 2005      996       996     Additional paid-in capital      161,672       161,672     Accumulated other comprehensive loss      (7,013 )     (7,895 )   Retained earnings      168,582       233,490     Treasury stock, 6,214,166 shares at December 28, 2004 and 6,772,949 at December 27, 2005      (64,357 )     (71,398 )                      Total stockholders’ equity      259,880       316,865                        Total liabilities and stockholders’ equity    $ 1,517,985     $ 1,547,707                       See accompanying notes to consolidated financial statements.    F-3    Table of Contents ClubCorp, Inc.    Consolidated Statements of Operations  Years ended December 30, 2003, December 28, 2004, and December 27, 2005  (Dollars in thousands, except per share amounts)                         2003     2004     2005     Operating revenues    $ 892,709     $ 938,802     $ 1,028,088          Operating costs and expenses      692,171       720,129       783,512     Depreciation and amortization      92,465       90,216       86,636     Selling, general and administrative expenses      78,162       68,157       70,476     Gain (loss) on disposals and impairment of assets      (8,144 )     (6,523 )     35,572                                Operating income from continuing operations      21,767       53,777       123,036          Interest and investment income      1,253       2,015       4,030     Interest expense      (63,399 )     (59,386 )     (61,105 )   Financing cost on prior debt facility      (10,569 )     —         —                                  Income (loss) from continuing operations before income taxes and minority interest      (50,948 )     (3,594 )     65,961          Income tax (provision) benefit      (59,297 )     (998 )     5,393     Minority interest      298       352       (679 )                              Income (loss) from continuing operations      (109,947 )     (4,240 )     70,675                                Discontinued operations:                   Income (loss) from discontinued operations before income taxes      4,978       (1,852 )     146     Income tax provision      (277 )     (150 )     (67 )                              Income (loss) from discontinued operations      4,701       (2,002 )     79                                Net income (loss)    $ (105,246 )   $ (6,242 )   $ 70,754                                Basic earnings (loss) per share from:                   Continuing operations    $ (1.17 )   $ (0.05 )   $ 0.76     Discontinued operations      0.05       (0.02 )     0.00                                Basic earnings (loss) per share    $ (1.12 )   $ (0.07 )   $ 0.76                                Diluted earnings (loss) per share from:                   Continuing operations    $ (1.17 )   $ (0.05 )   $ 0.75     Discontinued operations      0.05       (0.02 )     0.00                                Diluted earnings (loss) per share    $ (1.12 )   $ (0.07 )   $ 0.75                               See accompanying notes to consolidated financial statements.    F-4    Table of Contents ClubCorp, Inc.    Consolidated Statements of Stockholders’ Equity and Comprehensive Income/(Loss)  Years ended December 30, 2003, December 28, 2004, and December 27, 2005  (Dollars in thousands)                        Common stock (250,000,000 shares authorized, par value $.01 per share)       SharesIssued    TreasuryStockShares    SharesOutstanding     ParValue   Balances at December 31, 2002    99,594,408    5,867,217    93,727,191     $ 996         Purchase of treasury stock    —      18,471    (18,471 )     —           Comprehensive loss:                    Net loss    —      —      —         —     Change in fair value of financial instrutments    —      —      —         —     Foreign currency translation adjustment    —      —      —         —     Total comprehensive loss                          Change in redemption value of common stock held by benefit plan    —      —      —         —                              Balances at December 30, 2003    99,594,408    5,885,688    93,708,720     $ 996         Purchase of treasury stock    —      328,478    (328,478 )     —           Comprehensive loss:                    Net loss    —      —      —         —     Change in fair value of financial instruments    —      —      —         —     Change in fair value of net pension plan assets    —      —      —         —     Foreign currency translation adjustment    —      —      —         —     Total comprehensive loss                          Change in redemption value of common stock held by benefit plan    —      —      —         —                              Balances at December 28, 2004    99,594,408    6,214,166    93,380,242     $ 996         Purchase of treasury stock    —      558,783    (558,783 )     —           Comprehensive income:                    Net income    —      —      —         —     Change in fair value of net pension plan assets    —      —      —         —     Foreign currency translation adjustment    —      —      —         —     Total comprehensive income                          Change in redemption value of common stock held by benefit plan    —      —      —         —                              Balances at December 27, 2005    99,594,408    6,772,949    92,821,459     $ 996                           See accompanying notes to consolidated financial statements.    F-5    Table of Contents ClubCorp, Inc.                 Additional Paid-in Capital     Accumulated Other Comprehensive Loss     Retained Earnings     Treasury Stock     Total Stockholders’ Equity   $  161,672    $  (8,381)    $   288,553    $  (60,434)    $   382,406   —      —      —      (172)    (172)   —      —      (105,246)    —      (105,246)   —      3,221    —      —      3,221   —      (3,420)    —      —      (3,420)   —      2,314    —      —      2,314                                     (103,131)         —      —      507    —      507                          $  161,672    $  (6,266)    $   183,814    $  (60,606)    $   279,610   —      —      —      (3,751)    (3,751)   —      —      (6,242)    —      (6,242)   —      4    —      —      4   —      (1,305)    —      —      (1,305)   —      554    —      —      554                                     (6,989)         —      —      (8,990)    —      (8,990)                          $  161,672    $  (7,013)    $   168,582    $  (64,357)    $   259,880   —      —      —      (7,041)    (7,041)   —      —      70,754    —      70,754   —      (1,393)    —      —      (1,393)   —      511    —      —      511                                     69,872         —      —      (5,846)    —      (5,846)                          $ 161,672    $ (7,895)    $  233,490    $  (71,398)    $  316,865                         See accompanying notes to consolidated financial statements.    F-6    Table of Contents ClubCorp, Inc.    Consolidated Statements of Cash Flows  Years ended December 30, 2003, December 28, 2004, and December 27, 2005  (Dollars in thousands)                         2003     2004     2005     Cash flows from operating activities:                   Net income (loss)    $ (105,246 )   $ (6,242 )   $ 70,754     Adjustments to reconcile net income (loss) to cash flows from operating activities:                   Depreciation and amortization      94,386       91,123       86,791     (Gain) loss on disposals and impairment of assets      1,205       8,151       (36,700 )   Minority interest in net gain (loss) of subsidiaries      (298 )     (352 )     679     Equity in income of joint ventures      (234 )     (506 )     (373 )   Amortization of discount on membership deposits      11,429       12,556       13,059     Net change in deferred income taxes      52,539       (1,886 )     (9,200 )   Net change in real estate held for sale      2,538       1,137       2,213     Net change in prepaid expenses      2,764       (3,082 )     5,921     Net change in membership and other receivables, net      6,287       12,858       (2,036 )   Net change in accounts payable and accrued liabilities      673       (7,138 )     2,751     Net change in deferred income and other liabilities      (380 )     5,170       (22,429 )   Net change in deferred membership revenues      1,238       1,270       199     Other      7,484       6,125       9,856                                Cash flows from operating activities      74,385       119,184       121,485          Cash flows from investing activities:                   Additions to property and equipment      (55,194 )     (60,947 )     (76,219 )   Acquisitions of facilities      —         —         (1,974 )   Development of new facilities      (4,086 )     —         —       Development of real estate held for sale      (871 )     (2,652 )     (5,481 )   Proceeds from dispositions, net      35,592       129       90,778     Net change in notes receivable, net      (4,499 )     8,382       10,178     Net change in restricted cash      (25,742 )     (3,000 )     7,092     Other      274       —         406                                Cash flows from investing activities      (54,526 )     (58,088 )     24,780          Cash flows from financing activities:                   Proceeds from borrowings of long-term debt      771,906       —         —       Repayments of long-term debt      (719,685 )     (32,505 )     (47,260 )   Loan origination and amendment fees      (12,785 )     —         —       Change in membership deposits      2,904       6,887       531     Treasury stock transactions      (172 )     (3,751 )     (7,041 )                              Cash flows from financing activities      42,168       (29,369 )     (53,770 )                              Net change in cash and cash equivalents      62,027       31,727       92,495     Cash and cash equivalents at beginning of year      2,426       64,453       96,180                                Cash and cash equivalents at end of year    $ 64,453     $ 96,180     $ 188,675                               See accompanying notes to consolidated financial statements.  See accompanying Notes 1, 8, and 15 for supplemental disclosures of non-cash activities and cash paid for interest and income taxes.    F-7    Table of Contents ClubCorp, Inc.    Years ended December 30, 2003, December 28, 2004, and December 27, 2005  Note 1. Summary of significant accounting policies  Nature of operations  We are a holding company incorporated under the laws of the State of Delaware that, through our subsidiaries, have historically operated in one distinct business industry, hospitality services. Our operations in the hospitality industry involve the operation of country club and golf facilities, business and sports clubs and resorts through sole ownership, partial ownership (including joint venture interests), operating leases and management agreements. Other operations include sales of real estate.  Consolidation  The Consolidated Financial Statements include the accounts of ClubCorp, Inc. and its subsidiaries. All material intercompany balances and transactions have been eliminated.  Investments in affiliates for which we do not have operational or financial control are accounted for on the equity method. Under the equity method, original investments are recorded at cost and adjusted by dividends received and our share of the undistributed earnings or losses of these affiliates (Note 3). The investment balances are included in other non-current assets in the accompanying Consolidated Balance Sheets.  There is no minority interest recorded for minority stockholders of five country clubs and three golf clubs because of deficit capital positions. We have recognized minority stockholders’ share of these entities’ cumulative and 2005 losses, which are approximately $11.0 million and $1.5 million, respectively. We will recognize future positive earnings of these subsidiaries to the extent of minority interest losses previously absorbed.  Fiscal year  Our fiscal year consists of a 52/53 week fiscal year ending on the last Tuesday of December. Our 2003, 2004, and 2005 fiscal years are comprised of the 52 weeks ended December 30, 2003, December 28, 2004 and December 27, 2005, respectively.  Estimates  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.  Cash and cash equivalents  For purposes of the Consolidated Statements of Cash Flows, cash and cash equivalents include cash on hand and interest bearing deposits in financial institutions, all of which have maturities of 90 days or less.  Restricted Cash  We had $28.7 million and $21.7 million of restricted cash at December 28, 2004 and December 27, 2005, respectively. The 2005 balance is comprised of $19.0 million in collateral related to insurance policies and $2.7 million in collateral related to letters of credit in connection with debt covenants (See Note 8). The letters of credit have one-year terms and, therefore, the related restricted cash is included in current assets. In 2005, restricted cash decreased due to a reduction of the amount of collateral required for debt covenants, and the sale of a property in which we had a deposit related to a put option.  Membership, other receivables, and long-term receivables  Membership and other receivables as well as other long-term receivables are recorded net of an allowance for doubtful accounts of $3.4 million, $4.0 million and $3.1 million as of December 30, 2003, December 28, 2004, and December 27, 2005, respectively, and amounts charged to bad debt expense of $2.8 million, $2.2 million and $1.6 million, respectively. Amounts written off were $2.8 million, $1.6 million and $2.5 million for each of the years ended December 30, 2003, December 28, 2004, and December 27, 2005, respectively.    F-8    Table of Contents ClubCorp, Inc.    Inventories  Inventories, which consist primarily of food and beverages and merchandise held for resale, are stated at the lower of cost (weighted average cost method) or market value.  Property and equipment  Property and equipment is stated at depreciated cost. Land and land improvements include non-depreciable golf course improvements including fairways, roughs and trees. We capitalize costs that both materially add value and appreciably extend the useful life of an asset. With respect to golf course improvements, only costs associated with original construction, complete replacements, or the addition of new trees, sand traps, fairways or greens are capitalized. All other related costs are expensed as incurred.  Depreciation is calculated using the straight-line method based on the following estimated useful lives:           Building and recreational facilities    40 years   Depreciable land improvements    10 -20 years   Furniture and fixtures    3 - 10 years   Machinery and equipment    3 - 10 years  Leasehold improvements and assets under capital leases are amortized over the shorter of the term of the respective leases or useful life using the straight-line method.  Notes receivable  Notes receivable relate primarily to deferred initiation fees and deposits and notes receivable trade. At December 28, 2004 and December 27, 2005, deferred initiation fees and deposits were $29.4 million and $26.6 million, respectively. Notes receivable trade were $14.0 million and $6.7 million at December 28, 2004 and December 27, 2005, respectively.  Real estate held for sale  Real estate held for sale consists primarily of land, land development costs and related amenities that are to be left with the project upon completion. Costs are allocated to project components based on the specific identification method whenever possible. Otherwise, costs are allocated based on their relative sales value. Sales of real estate generally are accounted for under the full accrual method. Under that method, a gain is not recognized until the collectibility of the sales price is reasonably assured and the earnings process is virtually complete. At December 28, 2004 and December 27, 2005, real estate held for sale was $39.2 million and $16.6 million, respectively, and is included in other non-current assets in the Consolidated Balance Sheets.  In December 2005, we completed a sale of land to be used for the development of a master-planned residential community in the city of Aliso Viejo, California. As part of our agreement with the city of Aliso Viejo, we will manage a city-owned community conference center, an aquatic facility, and a park on the land which will be funded by the city and the purchaser of the land. In addition, we committed to develop a new clubhouse at Aliso Viejo, which we will own and operate along with a reconfigured 18-hole golf course. We received net cash proceeds of approximately $85 million after funding required escrows related to development of the clubhouse and paying various costs. The proceeds from this sale have been used to increase our cash reserves. The transaction resulted in a pre-tax gain of $46 million that is reflected on our Consolidated Statements of Operations in gain/(loss) on disposals and impairment of assets. Additionally, we have $10 million in deferred gain related to our commitment to develop the new clubhouse. This sale decreased real estate held for sale by $23 million in 2005.  Income taxes  Income taxes are accounted for using the asset and liability method. Under this method deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  Foreign currency translation  Assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the current exchange rate in effect at year-end. All foreign income and expenses are translated at the monthly weighted average exchange rates during the year.    F-9    Table of Contents ClubCorp, Inc.    Translation gains and losses are reported separately as a component of comprehensive income (loss). Realized foreign currency transaction gains and losses are reflected in the Consolidated Statements of Operations.  Treasury stock  Purchases of treasury stock are recorded at the cost of the shares acquired. When treasury stock is subsequently reissued, the difference between the cost of shares reissued, using the average cost method, and the sales price is charged or credited to additional paid-in capital.  Stock-based compensation  Stock-based compensation is accounted for using Accounting Principles Board Opinion (APB) No. 25, “Accounting for Stock Issued to Employees.” Under APB 25, if the exercise price of the options is greater than or equal to the market price at the date of grant, no compensation expense is recorded. We have also adopted the disclosure-only provisions of SFAS 123, “Accounting for Stock-based Compensation” for options issued, as amended by SFAS No. 148, “Accounting for Stock Based Compensation – Transition and Disclosure.”  Effective December 29, 2004, we changed certain of our assumptions used to calculate the fair value of options granted and compensation expense. We now use an expected life of seven years (previously 10 years) and a 3% forfeiture rate (previously zero). We are also calculating compensation expense on a straight-line basis over the applicable vesting period. Management believes these changes will more accurately reflect the value of our stock options granted and the requisite service period. These changes have been applied on a prospective basis. Had compensation cost for the option plans been determined based on the fair value at the grant dates for the options consistent with the methodology of SFAS 123, our net income (loss) and net earnings (loss) per share would have been changed to the following pro forma amounts (dollars in thousands, except per share amounts):                         2003     2004     2005     Net income (loss) as reported    $ (105,246 )   $ (6,242 )   $ 70,754     Less: Total stock-based compensation expense           determined under fair value method, net of taxes      (4,400 )     (8,276 )     (3,641 )                              Pro forma net income (loss)    $ (109,646 )   $ (14,518 )   $ 67,113                                Basic earnings (loss) per share - Reported    $ (1.12 )   $ (0.07 )   $ 0.76                                Basic earnings (loss) per share - Pro Forma    $ (1.17 )   $ (0.16 )   $ 0.72                                Diluted earnings (loss) per share - Reported    $ (1.12 )   $ (0.07 )   $ 0.75                                Diluted earnings (loss) per share - Pro Forma    $ (1.17 )   $ (0.16 )   $ 0.71                               Stock compensation expense related to options has not been recorded for any of the periods presented.  During the year ended December 30, 2003, we allowed employees, excluding those serving as members of the Board of Directors, with options issued prior to 2002 to forfeit those options and later be issued the same number of options six months and several days later with exercise prices at the then current stock price. This resulted in employees forfeiting options to acquire approximately 3.6 million shares of common stock in March 2003. On September 19, 2003, the Company granted options to acquire approximately 3.1 million shares of common stock to eligible employees with an exercise price of $9.30. These options fully vested on March 19, 2005. In accordance with APB 25, we did not recognize any additional compensation cost associated with the grant of these options (Note 12). The option repurchase transaction was considered a modification of the original options and, therefore, in accordance with SFAS 123, we recognized all remaining expense associated with the original options that were forfeited in the pro forma 2003 amounts above.    F-10    Table of Contents ClubCorp, Inc.    We will record compensation cost based on the requirements of SFAS 123R beginning in the first quarter of 2006. We believe the impact of this standard will cause an increase to operating expense of approximately $3.5 million ($2.3 million net of tax) for the year ending 2006.  Revenue recognition  We recognized revenues from the following sources:                      2003    2004    2005   Revenues from continuing operations:                  Membership fees and deposits    $ 38,914    $ 37,485    $ 35,763   Membership dues      311,063      322,987      337,074   Golf operations revenues (1)      167,153      172,799      212,412   Food and beverage revenues      242,150      264,807      275,975   Lodging revenues      54,464      58,141      61,394   Other revenues (2)      78,965      82,583      105,470                          Total operating revenues from continuing operations    $ 892,709    $ 938,802    $ 1,028,088                          Revenues from discontinued operations:                  Membership fees and deposits    $ 508    $ 166    $ 114   Membership dues      14,390      9,092      4,562   Golf operations revenues      3,179      1,614      1,235   Food and beverage revenues      7,708      3,192      1,401   Lodging revenues      —        —        —     Other revenues      5,105      3,704      2,692                          Total operating revenues from discontinued operations    $ 30,890    $ 17,768    $ 10,004                          Total operating revenue    $ 923,599    $ 956,570    $ 1,038,092                           (1) The 2005 amounts include the impact of ticket sales, rental of corporate hospitality tents and concessions of approximately $36 million related to the 2005 U.S. Open.    (2) The 2005 amounts include the impact of merchandise sales of approximately $15 million related to the 2005 U.S. Open.  Revenues from golf operations, lodging, food and beverage and merchandise sales are recognized at the time of sale or when the service is provided. Revenues from membership dues are billed monthly and recognized in the period earned. The monthly dues are expected to cover the cost of providing future membership services. Lifetime membership dues are recognized as income using the straight-line method over 20 years, the estimated average life of a lifetime membership. Prepaid dues are recognized as income over the prepayment period.  The majority of membership deposits sold are not refundable until a fixed number of years (generally 30) after the date of acceptance of a member, and are expected to cover our cost of providing services to the member over the course of the individual’s membership. Because of the refundable nature of our deposits and the fact that few of our clubs have membership caps, we believe that revenue related to deposits should be recognized over the average expected life of an active membership. This position is supported by our prior correspondence with the SEC on this matter in 1998. For membership deposits, the difference between the amount paid by the member and the present value of the refund obligation is deferred and recognized as membership fees and deposits revenue on a straight-line basis over the average expected life of an active membership, which was six years for golf and resort memberships and five years for business and sports club memberships through 2005. Based on our year-end calculation, the average life of an active membership will change to seven years for golf and resorts memberships beginning in 2006. The present value of the refund obligation is recorded as a membership deposit liability in our consolidated balance sheet and accretes over the nonrefundable term using the effective interest method with an interest rate defined as our weighted average borrowing rate adjusted to reflect a 30-year time frame. The accretion is included in interest expense. The majority of our membership fees are not refundable and are deferred and recognized over the average expected life of an active membership.    F-11    Table of Contents ClubCorp, Inc.    At December 27, 2005, the amount of membership deposits that are or will become contractually due and payable during the next five years is approximately $33.1 million.  Divestiture of subsidiaries  Subsidiaries are divested when management determines they will be unable to provide a positive contribution to cash flows from operations in future periods and/or when they are determined to be nonstrategic holdings for the company. Gains from divestitures are recognized in the period in which operations cease and losses are recognized when they become apparent. These are reflected in discontinued operations in the Consolidated Statements of Operations as loss on disposals and impairments of assets.  Interest rate swap and cap agreements  Interest payments on approximately 61% of the floating portion of our current debt are protected by interest rate cap agreements that limit our exposure to rises in interest rates over certain amounts (Note 8).  Previously, we entered into interest rate swap agreements to limit our exposure to fluctuations in interest rates related to our prior bank facility. In accordance with SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,” we accounted for these swap agreements by recording the net interest to be paid or received as an increase or reduction in interest. These swaps were not renewed under our new mortgage debt. As a result, at December 28, 2004, all swap agreements had matured.  Earnings (loss) per share  The following table summarizes the weighted average number of shares used to calculate basic and diluted earnings (loss) per share:                   2003    2004    2005   Weighted average shares outstanding    93,727,549    93,618,583    93,161,779   Incremental shares from assumed conversion of options    —      —      1,359,131                    Diluted weighted average shares    93,727,549    93,618,583    94,520,910                   The diluted weighted average shares exclude the assumed conversion of 26,897 and 706,610 options and warrants for the years ended December 30, 2003 and December 28, 2004, respectively, due to our net losses recorded for those years (Notes 10 and 12).  Reclassifications  Certain amounts previously reported have been reclassified to conform with the current year presentation.  Recent Pronouncements  In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment,” which replaces SFAS No. 123, “Accounting for Stock-Based Compensation,” and supercedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS No. 123 (revised 2004) requires compensation costs related to share-based payment transactions to be recognized in the financial statements. With limited exceptions, the amount of compensation cost will be measured based on fair value on the grant date of the equity instruments issued or marked to market each period for the liability instruments issued. Compensation cost will be recognized over the period that an employee provides service for that award. This new standard will be effective for us beginning in our first quarter of 2006. We believe the impact of this standard will cause an increase to operating expense of approximately $3.5 million ($2.3 million net of tax) for the year ending 2006.  In December 2004, the FASB issued SFAS No. 152, “Accounting for Real Estate Time-Sharing Transactions”, which clarifies accounting treatment for timeshare transactions and related costs. SFAS No. 152 is effective for fiscal years beginning after June 15, 2005. We do not believe the adoption of this statement will have a material effect on our Consolidated Financial Statements.  In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29”. SFAS No. 153 is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. APB Opinion No. 29, “Accounting for Nonmonetary Transactions,” provided an exception to     F-12    Table of Contents ClubCorp, Inc.     its basic measurement principle (fair value) for exchanges of similar productive assets. Under APB Opinion No. 29, an exchange of a productive asset for a similar productive asset was based on the recorded amount of the asset relinquished. SFAS No. 153 eliminates this exception and replaces it with an exception of exchanges of nonmonetary assets that do not have commercial substance. We will apply the requirements of SFAS No. 153 on any future nonmonetary exchange transactions.  In March 2005, the FASB issued FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations” (FIN 47). FIN 47 addresses the recording and reporting of asset retirement obligations if removal of materials such as asbestos insulation, lead paint PCBs, or other material covered by environmental regulations, is required. The adoption of FIN 47 did not have an effect on our Consolidated Financial Statements.  In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections, a replacement of APB Opinion No. 29 and FASB Statement No. 3”. SFAS No. 154 requires retrospective application to prior periods’ financial statements of a voluntary change in accounting principle unless it is impracticable. APB Opinion No. 20 “Accounting Changes”, previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. We will apply the requirements of SFAS No. 154 on any future accounting changes or error corrections.  Note 2. Variable interest entities  During 1994, we formed a joint venture with a real estate developer to acquire and develop real estate around a country club. Prior to the adoption of FIN 46R, we accounted for our investment in the joint venture under the equity method, recording a majority of the venture’s operating results. We are the general partner of the joint venture, however, we do not control a majority ownership percentage; therefore, operating decisions would have to go to arbitration in the event of a split in voting. We recorded 100% of all losses and then participated in earnings proportionally with the other partners.  The joint venture purchases virtually all the support services it requires from us and from the real estate developer under management service agreements, which expire at the completion of the development. With the adoption of FIN 46R, we consolidated the joint venture beginning with our March 23, 2004 Condensed Consolidated Balance Sheet, as the joint venture was determined to be a variable interest entity with us as its primary beneficiary. Due to the historical net operating losses of the joint venture in excess of the partners’ equity interests of the joint venture not owned by us, no noncontrolling interests are reported in our December 27, 2005 Consolidated Balance Sheet. The investment was carried as a $19.8 million investment liability prior to consolidation.  The joint venture was financed by the assumption of debt, of which $11.8 million is currently outstanding and is included in long-term debt, along with accrued interest of approximately $11.9 million that is included in other liabilities on the Consolidated Balance Sheet. The majority of the joint venture’s debt is payable only out of distributable cash flow, as defined by the agreements. The notes are subordinated and junior to other liens and are collateralized by the real estate owned by the joint venture. The creditors of the joint venture do not have recourse to our other assets.  Other variable interest entities consolidated by us in conjunction with the implementation of FIN 46R include a managed golf operation and liquor pool entities associated with certain properties. The impact of consolidating these entities on the Consolidated Balance Sheets and Consolidated Statements of Operations is not significant.    F-13    Table of Contents ClubCorp, Inc.    Note 3. Investments in affiliates  Our investments in affiliates include the operations for joint ventures of three golf clubs and one business club at December 28, 2004 and December 27, 2005. These investments are reflected in other non-current assets on the Consolidated Balance Sheets and the equity gain or loss is included in operating revenues in the Consolidated Statements of Operations.  A summary of the significant financial information of affiliated companies accounted for on the equity method is as follows (dollars in thousands):                   2004    2005   Current assets    $ 6,067    $ 6,965   Fixed assets, net      33,899      30,676   Other assets      4,514      3,883                   Total assets    $ 44,480    $ 41,524                   Membership deposits    $ 9,458    $ 9,597   Long-term debt      12,854      11,717   Other liabilites      9,991      9,593   Partners’ capital      12,177      10,617                   Total liabilities and capital    $ 44,480    $ 41,524                   Operating revenue    $ 20,924    $ 16,303   Income from operations    $ 10,820    $ 1,743       Net income    $ 1,014    $ 725       ClubCorp’s equity in:             Net assets    $ 4,820    $ 2,720   Net income    $ 506    $ 373  During 2005, we purchased the remaining portion of one of our joint venture golf clubs for approximately $2.0 million. This entity is included in our consolidated operations for 2005.  Note 4. Fair value of financial instruments  Fair value estimates are made at a specific point in time, based on relevant information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time our entire holdings of a particular financial instrument. Since no market exists for certain financial instruments, fair value estimates are based on our judgment regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect estimates.  The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value:  Cash and cash equivalents  The carrying amount of cash and cash equivalents approximates fair value due to the short maturity of these instruments.  Long-term debt  Fair values for fixed rate debt, capital leases and other obligations are based on the discounted value of contractual cash flows using our incremental borrowing rates for similar types of debt arrangements. The estimated fair value of these obligations was $448.3 million and $450.8 million at December 28, 2004 and December 27, 2005, respectively. The carrying value of these obligations was $440.3 million and $435.0 million at December 28, 2004 and December 27, 2005, respectively (Note 8).    F-14    Table of Contents ClubCorp, Inc.    The fair value for variable rate debt is also based on the discounted value of contractual cash flows using our incremental borrowing rates for similar types of debt arrangements. The estimated fair value of these obligations was $257.2 million and $242.1 million at December 28, 2004 and December 27, 2005, respectively. The carrying value of these obligations was $267.5 million and $236.6 million at December 28, 2004 and December 27, 2005, respectively (Note 8).  Membership deposits  Management believes that the carrying value of membership deposits approximates estimated fair value at year end. The carrying value at December 28, 2004 and December 27, 2005 of membership deposits was $153.7 million and $169.6 million, respectively. Included in the carrying value are membership deposits that are related to properties that were considered held for sale as of December 27, 2005. The carrying value of membership deposits related to held for sale properties at December 28, 2004 and December 27, 2005 was $5.2 million and $5.7 million, respectively (Note 6).  Note 5. Property and equipment  Property and equipment consists of the following at year-end (dollars in thousands):                     2004     2005     Land and land improvements    $ 735,395     $ 738,558     Buildings and recreational facilities      502,126       509,211     Leasehold improvements      105,823       118,044     Furniture and fixtures      135,191       142,629     Machinery and equipment      281,021       313,279     Construction in progress      17,570       21,413                             1,777,126       1,843,134     Accumulated depreciation and amortization      (635,542 )     (718,373 )                         $ 1,141,584     $ 1,124,761                         F-15    Table of Contents ClubCorp, Inc.    Note 6. Disposal and impairment of long-lived assets  On December 26, 2001, we adopted Statement of Financial Accounting Standards No. 144 (SFAS 144), “Accounting for the Impairment or Disposal of Long-Lived Assets”. In conjunction with SFAS 144, for all periods presented, certain assets and liabilities expected to be sold with the held-for-sale entities have been reclassified to Other Current Assets and Other Current Liabilities, and all income and expense items have been reclassified as Discontinued Operations.  As of December 28, 2004 and December 27, 2005, we had one property classified as held for sale. The balance sheet amounts related to this property were reclassified to Other Current Assets and Other Current Liabilities on the Consolidated Balance Sheets and were comprised of the following (dollars in thousands):                   2004    2005   Membership and other receivables, net    $ 431    $ 273   Inventories      75      69   Other current assets      29      13   Property and equipment, net      6,451      6,538   Other assets      103      42                   Total assets    $ 7,089    $ 6,935                   Accounts payable and accrued liabilities    $ 196    $ 113   Other current liabilities      169      144   Long-term debt      3,026      2,811   Other liabilities      426      196                   Total liabilities    $ 3,817    $ 3,264                  The held for sale property, as well as all properties that were divested during the year ended December 27, 2005, were reclassified to Discontinued Operations on the Consolidated Statements of Operations. See Note 11 for detail of the Consolidated Statements of Operations impact of Discontinued Operations by segment and in total.  We review all properties held for sale for impairment. We also evaluate properties for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through future cash flows. We use a discounted future operating cash flow with a risk-adjusted discount rate in determining the fair value of the asset and its related impairment  For assets to be held and used, we perform a recoverability test to determine if the future undiscounted cash flows over our expected holding period for the property exceed the carrying amount of the assets of the property in question. If the recoverability test is not met, fair value is determined by comparing the carrying value of the property to its future discounted cash flows using a risk-adjusted discount rate. Future cash flows of each property are determined using management’s projections of the performance of a given property based on its past performance and expected future performance given changes in marketplace, local operations and other factors both in our control and out of our control. Additionally, we review current property appraisals when available to ensure recoverability. Actual results that differ from these estimates can generate material differences in impairment charges recorded and, ultimately, net income or loss in our Consolidated Statements of Operations and the carrying value of properties on our Consolidated Balance Sheets.  For the years ended December 30, 2003, December 28, 2004, and December 27, 2005, we recorded impairments of $3.0 million, $4.1 million, and $8.9 million, respectively.    F-16    Table of Contents ClubCorp, Inc.    Note 7. Current liabilities  Current liabilities consist of the following at year-end (dollars in thousands):                   2004    2005   Accounts payable    $ 23,624    $ 25,025   Accrued compensation and employee benefits      32,990      35,315   Other accrued liabilities      23,233      26,934                   Accounts payable and accrued liabilities      79,847      87,274       Long-term debt - current portion      23,220      75,604   Membership deposits - current portion      16,940      18,341       Deferred membership revenue      14,162      14,316   Other deferred revenue      39,984      30,410   Property taxes payable      19,090      20,051   Other current liabilities      56,671      56,148                   Other liabilities      129,907      120,925                   Total current liabilities    $ 249,914    $ 302,144                    F-17    Table of Contents ClubCorp, Inc.    Note 8. Long-term debt and lease commitments  Long-term borrowings and lease commitments are summarized below at year-end (dollars in thousands):                       2004    2005     Interest Rate     Maturity   Notes payable to financial institutions:                     Pacific Life Insurance Corporation    $ 216,815    $ 213,100    6.73% to 7.23%    2013   Pacific Life Insurance Corporation      96,400      93,759    6.11% to 8.56%    2010 -2017   Pacific Life Insurance Corporation      82,375      80,772     2.75% + 30 day LIBOR (7.13% at December 27, 2005)    2006 -2008   Pacific Life Insurance Corporation      37,811      37,129     3.25% + 30 day LIBOR (7.63% at December 27, 2005)    2006   Pacific Life Insurance Corporation      72,274      70,955    6.61%    2010   Textron Financial Corporation      86,079      57,713    Various fluctuating rates ranging from 8.25% to 8.50% at December 27, 2005    2007 -2008         Textron Financial Corporation      27,226      26,394    5.90%    2008   GMAC Commercial Mortgage Company      59,422      58,432     3.75% + 30 day LIBOR (8.13% at December 27, 2005)    2008         California Bank and Trust      2,041      1,916    8.63%    2006   Other mortgage notes      50      2,950    5.50% to 7.75%    2008 -2010   Notes payable to developers and landlords:                     Fixed rate      14,324      13,073    8.00% to 9.0%    2006 -2013   Floating rate      1,821      1,800     4.00% + 30 day LIBOR (8.38% at December 27, 2005)    2008                                696,638      657,993           Capital leases      11,195      13,625                                        707,833      671,618           Less current portion      23,220      75,604                                      $ 684,613    $ 596,014                                  Interest payments on approximately 61% of the floating portion of our debt are protected by interest rate cap agreements that limit our exposure to rises in interest rates over certain amounts. These interest rate caps mature on July 3, 2006. The aggregate fair market value of all interest rate cap agreements was $8,000 on December 28, 2004 and zero on December 27, 2005 and is included in other assets on the Consolidated Balance Sheets. We recognized interest expense for the years ended December 28, 2004 and December 27, 2005 of $278,000 and $8,000, respectively, to record the change in fair value of these instruments.  In early 2006, we amended a loan agreement representing approximately $37 million of debt maturing in 2006 and established a secured $50 million line of credit which will mature in 2010. As a result, we paid down approximately $32 million and transferred the remaining $5 million as an initial draw on the line of credit.    F-18    Table of Contents ClubCorp, Inc.    The amounts of our existing long-term debt maturing in each of the five years subsequent to 2005 and thereafter are as follows (dollars in thousands):            Year    Amount   2006    $ 75,604   2007      26,462   2008      201,442   2009      10,910   2010      141,423   Thereafter      215,777            Total    $ 671,618           Under the provisions of certain of our debt agreements with Textron Financial Corporation (Textron), we are required to maintain debt service coverage ratios at both the portfolio and individual property level. Certain of these individual loans have cross-default provisions; therefore, a default on an individual loan triggers a default on the portfolio. As of December 27, 2005, the debt service coverage ratio was below the minimum level for four individual properties participating in the loan, thereby causing the entire loan ($53 million in principal amount) to be in technical default. We cured the noncompliance by obtaining letters of credit totaling $2.7 million.  For the year ended December 27, 2005 we have added approximately $7.9 million in new capital leases to our debt with the offset to property, plant and equipment on our Consolidated Balance Sheet.  The amount of cash paid for interest in 2003, 2004 and 2005 was approximately $51.2 million, $49.0 million and $53.8 million, respectively.  We lease operating facilities under agreements with terms ranging from 1 to 60 years. These agreements normally provide for minimum rentals plus executory costs. In some cases, we must pay contingent rent generally based on a percentage of gross receipts or positive cash flow as defined in the lease agreements. Future minimum lease payments required at December 27, 2005 under operating leases for buildings and recreational facilities with initial non-cancelable lease terms in excess of one year are as follows (dollars in thousands):            Year    Amount   2006    $ 17,966   2007      16,872   2008      16,316   2009      14,814   2010      13,468   Thereafter      84,659            Total future minimum payments    $ 164,095           Total facility rental expense during 2003, 2004 and 2005 was $33.2 million, $32.0 million and $30.5 million, respectively, including contingent rent of $2.9 million, $3.1 million and $4.7 million, respectively.    F-19    Table of Contents ClubCorp, Inc.    Note 9. Other liabilities  Other liabilities consist of the following at year-end (dollars in thousands):                   2004    2005   Deferred membership revenue    $ 80,012    $ 78,495   Deferred tax liabilities (Note 15)      23,894      14,694   Deferred rent      9,740      11,796   Insurance reserves      10,359      9,416   Other      15,617      13,984                   Total other liabilities    $ 139,622    $ 128,385                  Note 10. Stockholders’ equity  On December 1, 1999, we sold 9,375,000 shares of common stock and 1,012,500 common stock purchase warrants for a price of $16 per share to affiliates of the Cypress Group. The sale resulted in total proceeds of $150.0 million, net of issuance costs of $6.0 million. Each common stock purchase warrant allows the holder to purchase one share of common stock for $17 per share and is exercisable through 2009. The value of these warrants is included in additional paid-in capital and is not significant to our Consolidated Balance Sheets. During the years ended December 28, 2004 and December 27, 2005, no common stock purchase warrants were exercised. Beginning in December 2004, we are obligated under certain defined conditions to offer to repurchase a portion of their outstanding shares if we are below a defined leverage ratio. During 2005, we were above the stated leverage ratio and were not required to offer to repurchase any shares of common stock during 2005 and we do not anticipate this occurring in 2006.  At our option, we have historically repurchased stock from stockholders when offered for sale to us on a limited basis. The Stockholders Agreement with The Cypress Group L.L.C. limits our stock repurchases, without their prior authorization, to $2.5 million per year from Nancy Dedman, Robert H. Dedman, Jr., Patricia Dedman Dietz, and the Dedman Foundation and related trusts in total, $5.0 million per year from certain charitable and non-profit organizations, and $2.5 million per year from all other stockholder groups. The redemption right of the Amended Plan is not limited by this agreement. During the year ended December 28, 2004 and December 27, 2005, we repurchased stock from stockholders totaling $3.8 million and $7.0 million, respectively.    F-20    Table of Contents ClubCorp, Inc.    Note 11. Segment reporting  Our operations are organized into three principal business segments according to the type of facility or service provided: country club and golf facilities, business and sports clubs and resorts. We have determined that the operations of these three segments have similar economic characteristics and meet the criteria, which permit the operations to be aggregated into these reportable segments. The primary sources of revenue for all segments are membership revenues, consisting of dues, fees and deposits, and food and beverage sales. Additionally, country club and golf facilities and resorts have significant golf operations revenue and resorts have significant lodging revenue.  Country club and golf facilities operations consist of private country clubs, golf clubs and public golf facilities. Private country clubs provide at least one 18-hole golf course and various other recreational amenities that are open only to members and their guests. Golf clubs provide both private and public golf play and usually offer fewer other recreational amenities. Public golf facilities are open to the public and generally provide the same services as golf clubs.  Resorts offer a wide variety of amenities including golf courses, lodging and conference facilities, dining areas and other recreational facilities. Resorts are open to the public and offer optional membership. In 2005, resorts operations include the impact of hosting the 2005 U.S. Open at Pinehurst.  Business and sports club operations consist of business clubs, business/sports clubs and sports clubs. Business clubs provide a setting for dining, business or social entertainment. Sports clubs provide a variety of recreational facilities and business/sports clubs provide a combination of the amenities available at business clubs and sports clubs. All amenities offered above are available only to members and their guests.  Other operations and services consist of real estate operations, corporate overhead and intercompany eliminations made in the consolidation between corporate services and other operating segments. Real estate operations are comprised of residential real estate development and sales, primarily in areas adjacent to golf facilities. The majority of other operating revenues is provided from real estate sales.  We evaluate segment performance and allocate resources based on each segment’s EBITDA. We also use EBITDA to monitor our property-level and overall performance. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. EBITDA for all periods presented has been calculated using this definition. EBITDA should not be construed as an alternative to, or a better indicator of, operating income or loss, is not based on accounting principles generally accepted in the United States of America, and is not necessarily a measure of our cash flow or ability to fund our cash needs. Our measurements of EBITDA may not be comparable to similar titled measures reported by other companies.    F-21    Table of Contents ClubCorp, Inc.    Financial information for the segments is as follows (dollars in thousands):                         Continuing Operations         2003     2004     2005     Operating revenues                   Country club and golf facilities    $ 480,763     $ 504,347     $ 525,381     Resorts (1)      196,846       209,893       269,743     Business and sports clubs      202,960       210,992       218,698     Other operations and services      12,140       13,570       14,266                                Total operating revenues     $ 892,709     $ 938,802     $ 1,028,088          EBITDA                   Country club and golf facilities      110,654       117,981       123,115     Resorts (1)      46,652       48,567       64,766     Business and sports clubs      32,693       34,437       37,800                                Reportable segment EBITDA     $ 189,999     $ 200,985     $ 225,681                                     Reconciliation to income (loss) before income taxes and minority interest:                   Reportable segment EBITDA    $ 189,999     $ 200,985     $ 225,681     Other operations and sevices operating revenues      12,140       13,570       14,266     Other operations and services operating costs and expenses      (79,763 )     (64,039 )     (65,847 )   Depreciation and amortization      (92,465 )     (90,216 )     (86,636 )   Gain (loss) on disposals and impairment of assets (2)      (8,144 )     (6,523 )     35,572     Interest and investment income      1,253       2,015       4,030     Interest expense and financing costs      (73,968 )     (59,386 )     (61,105 )                              Income (loss) from operations before income taxes and minority interest    $ (50,948 )   $ (3,594 )   $ 65,961                                 (1) The 2005 amounts include the impact of ticket sales, rental of corporate hospitality tents, concessions, and merchandise sales of approximately $51 million related to the 2005 U.S. Open. This resulted in an increase of approximately $14 million in EBITDA.    (2) The 2005 amounts include the sale of land at one of our properties, which resulted in a gain of approximately $46 million (Note 1).    F-22    Table of Contents ClubCorp, Inc.                         Discontinued Operations         2003     2004     2005     Operating revenues                   Country club and golf facilities    $ 11,449     $ 5,287     $ 4,789     Resorts      —         —         —       Business and sports clubs      19,441       12,481       5,215     Other operations and services      —         —         —                                  Total operating revenues     $ 30,890     $ 17,768     $ 10,004          EBITDA                   Country club and golf facilities      1,060       232       139     Resorts      —         —         —       Business and sports clubs      847       1,477       820                                Reportable segment EBITDA     $ 1,907     $ 1,709     $ 959                                     Reconciliation to income (loss) before income taxes and minority interest:                   Reportable segment EBITDA    $ 1,907     $ 1,709     $ 959     Other operations and services operating revenues      —         —         —       Other operations and services operating costs and expenses      (858 )     (87 )     (908 )   Depreciation and amortization      (1,921 )     (907 )     (155 )   Gain (loss) on disposals and impairment of assets      6,939       (1,628 )     1,128     Interest and investment income      —         —         1     Interest expense and financing costs      (1,089 )     (939 )     (879 )                              Income (loss) from operations before income taxes and minority interest    $ 4,978     $ (1,852 )   $ 146                                 F-23    Table of Contents ClubCorp, Inc.                         Total Company         2003     2004     2005     Operating revenues                   Country club and golf facilities    $ 492,212     $ 509,634     $ 530,170     Resorts (1)      196,846       209,893       269,743     Business and sports clubs      222,401       223,473       223,913     Other operations and services      12,140       13,570       14,266                                Total operating revenues     $ 923,599     $ 956,570     $ 1,038,092          EBITDA                   Country club and golf facilities    $ 111,714     $ 118,213     $ 123,254     Resorts (1)      46,652       48,567       64,766     Business and sports clubs      33,540       35,914       38,620                                Reportable segment EBITDA     $ 191,906     $ 202,694     $ 226,640                                     Reconciliation to income (loss) before income taxes and minority interest:                   Reportable segment EBITDA    $ 191,906     $ 202,694     $ 226,640     Other operations and sevices operating revenues      12,140       13,570       14,266     Other operations and services operating costs and expenses      (80,621 )     (64,126 )     (66,755 )   Depreciation and amortization      (94,386 )     (91,123 )     (86,791 )   Gain (loss) on disposals and impairment of assets (2)      (1,205 )     (8,151 )     36,700     Interest and investment income      1,253       2,015       4,031     Interest expense and financing costs      (75,057 )     (60,325 )     (61,984 )                              Income (loss) from operations before income taxes and minority interest    $ (45,970 )   $ (5,446 )   $ 66,107                                 (1) The 2005 amounts include the impact of ticket sales, rental of corporate hospitality tents, concessions, and merchandise sales of approximately $51 million related to the 2005 U.S. Open. This resulted in an increase of approximately $14 million in EBITDA.    (2) The 2005 amounts include the sale of land at one of our properties, which resulted in a gain of approximately $46 million (Note 1).    F-24    Table of Contents ClubCorp, Inc.    Continued Segment Information                     2004     2005     Consolidated Balance Sheet:              Total assets:              Country club and golf facilities    $ 1,152,352     $ 1,148,670     Business and sports clubs      100,018       104,998     Resorts      557,866       541,927                        Total assets for reportable segments      1,810,236       1,795,595     Other operations and services (1)      (292,251 )     (247,888 )                      Consolidated total assets    $ 1,517,985     $ 1,547,707                         (1) For purposes of this table, we have not allocated intercompany eliminations to all the segments. These eliminations appear in other operations and services. This results in a negative asset balance.  Note 12. Benefit plans  We maintain an employee stock ownership plan, known as the ClubCorp Employee Stock Ownership Plan (the “Plan”). Eligible employees have the opportunity to invest between 1% to 6% of their pretax compensation in the Plan, subject to certain limitations. Participant contributions are matched 20% on a quarterly basis with an option at year end for an additional discretionary match by the company. The matching contribution vests over six years. Participants may elect to diversify a portion of their account assets upon meeting certain age and participation requirements. In addition, upon termination, retirement or permanent disability, a participant or beneficiary may demand distribution of our common stock in lieu of cash. All of the assets of the Plan are invested in our common stock, except for temporary investments of cash.  As a means of providing liquidity to the trustees, we have provided the trustees a limited put right (the “Redemption Right”) to cause us to redeem common stock, held in trust on behalf of the Plan, at the most recent fair market value as necessary to meet the following requirements: (1) to fund a participant’s distribution in cash, (2) to diversify a participant’s account in accordance with Internal Revenue Code Section 401(a)(28), (3) to pay expenses incurred by the trustees, and (4) to comply with directions from the plan administrator. The Redemption Right has never been exercised by the trustees, although we have repurchased common stock into treasury from certain stockholders. We do not expect that the Redemption Right will be exercised in 2006. The Plan held 4,106,145 and 4,107,356 shares at December 28, 2004 and December 27, 2005, respectively. The shares are valued at the most recent appraised value ($11.49 and $12.91 at December 28, 2004 and December 27, 2005, respectively) as necessary in order to meet the requirements of the Employee Retirement Income Security Act and the Plan. Accordingly, we have reclassified the redemption value of our common stock held by the Plan out of stockholders’ equity in the accompanying Consolidated Balance Sheets and changes in the redemption value have been charged to retained earnings.  We maintain a second qualified contributory plan for all eligible employees of certain domestic subsidiaries. This Plan allows participants to invest up to 50% of their pretax compensation among eleven investment fund options, subject to certain limitations.  We also maintain a defined pension plan for one of our properties. For the years ended December 28, 2004 and December 27, 2005, we have a liability recorded related to unfunded obligations of $3.7 million and $4.9 million, respectively, and other comprehensive loss of $4.7 million and $6.1 million, respectively. We have recorded pension expense related to the pension plan of $0.7 million and $1.1 million for the years ended December 28, 2004 and December 27, 2005, respectively. The accumulated benefit obligation for the plan was $22.0 million and $23.8 million at December 28, 2004 and December 27, 2005, respectively. The fair value of the plan assets as of December 28, 2004 and December 27, 2005 was $18.2 million and $18.9 million, respectively. We have not included the required disclosures under SFAS No. 132R, as the plan is not significant to our overall consolidated financial statements.  The ClubCorp, Inc. Executive Stock Option Plan was adopted August 31, 1995. In February 2000, we transferred substantially all of the remaining available shares in this plan to the Omnibus Stock Plan. In August 2003, we transferred the remaining available shares in this plan to the Omnibus Stock Plan. The plan provides for accelerated vesting, not to exceed    F-25    Table of Contents ClubCorp, Inc.    10% per year, if the employee maintains a certain performance level as defined in the plan. Certain executive level employees are required to maintain a minimum ownership level of company stock holdings, as set forth in the plan, to sell stock acquired from exercised options. At December 27, 2005, there were options outstanding to acquire 420,000 shares of common stock under the Executive Stock Option Plan, all of which are exercisable.  We apply APB 25 in accounting for the option plans; therefore, no compensation expense has been recognized for options that have been granted to employees. In accordance with the requirements of SFAS 123, the fair value of the options granted was estimated using the Black-Scholes option-pricing model with the following assumptions for the 2003, 2004 and 2005 grants: risk-free weighted average interest rates of 4.1%, 4.5% and 4.0% respectively, an expected volatility of 40%, an expected life of ten years and zero dividend yield. In 2005, we changed the expected life to seven years and included a 3% forfeiture rate (previously zero). The summary of the status of the options outstanding at year-end 2003, 2004 and 2005 and changes during the fiscal years is as follows:                   Shares     AverageExercisePrice   Summary of Option Activity:                Outstanding at December 31, 2002    6,301,757     $ 13.79   Granted    4,693,586     $ 9.12   Forfeited    (3,980,464 )   $ 14.50   Exercised    —       $ —     Outstanding at December 30, 2003    7,014,879     $ 10.25                    Granted    692,750     $ 11.38   Forfeited    (817,351 )   $ 10.79   Exercised    —       $ —                  Outstanding at December 28, 2004    6,890,278     $ 10.27       Granted    923,380     $ 12.53   Forfeited    (256,145 )   $ 10.84   Exercised    —       $ —                  Outstanding at December 27, 2005    7,557,513     $ 10.52               The following table summarizes information about stock options outstanding at December 27, 2005:                         Options Outstanding    Options Exercisable   Exercise Price    NumberOutstanding    Weighted Avg.RemainingContractualLife (in Years)    Weighted Avg.Exercise Price    NumberExercisable    Weighted Avg.Exercise Price   $8.60 - 9.30    4,136,903    5.49    $ 9.09    3,401,903    $ 7.78   9.42 - 11.49    1,225,000    5.59      10.90    601,000      10.42   12.10 - 14.21    1,992,110    7.12      12.57    788,382      8.41   16.38 - 17.71    203,500    4.80      17.18    187,400      17.25                                7,557,513             4,978,685                                   F-26    Table of Contents ClubCorp, Inc.                      2003    2004    2005   Detail of Options Exercisable:                  Number of options      1,242,515      1,581,029      4,978,685   Weighted average exercise price    $ 12.70    $ 11.83    $ 10.21   Weighted average fair value of options granted during the year    $ 4.70    $ 6.69    $ 6.18  During the year ended December 30, 2003, we allowed employees with options issued prior to 2002 to forfeit those options and later be issued the same number of options six months and several days later at the then current stock price. This resulted in employees forfeiting options to acquire approximately 3.6 million shares of common stock in March 2003. On September 19, 2003, the Company granted options to acquire approximately 3.1 million shares of common stock to eligible employees with an exercise price of $9.30 per share. These options were fully vested as of March 19, 2005. In accordance with APB 25, we did not recognize any additional compensation cost associated with the grant of these options.  Note 13. Related Party Transactions  During 1999, we sold 9,375,000 shares of common stock and warrants to acquire 1,012,500 shares of common stock to The Cypress Group. Beginning in December 2004, we are obligated under certain defined conditions to offer to repurchase a portion of the outstanding shares if we are below a defined leverage ratio. Based on the calculation, we were above the stated leverage ratio and were not required to offer to repurchase any shares during 2005 (Note 10).  Note 14. Commitments and Contingencies  For the year ended December 27, 2005, we have commitments of letters of credit of $19.0 million that are primarily related to secure future estimated claims for workers’ compensation and general liability insurance and $2.7 million in letters of credit in order to cure a default of a portion of our debt with Textron (Note 1). These letters of credit are all secured by cash deposits in the full amount.  We have provided the trustees of the Amended Plan a limited put right to cause us to redeem our common stock at the most recent appraised fair market value as necessary to meet certain liquidity requirements. The Amended Plan owns 4.4% of our outstanding common stock with a redemption value of $53 million as of December 27, 2005. The Redemption Right has never been exercised by the Amended Plan and we do not expect that it will be exercised in 2006 (Note 12).  As of December 27, 2005, we have capital commitments of $19.3 million at certain of our country clubs related to future construction or capital contributions after the developer has completed construction.    F-27    Table of Contents ClubCorp, Inc.    Note 15. Income taxes  Income (loss) before income taxes and minority interest consists of the following, including continuing and discontinued operations (dollars in thousands):                        2003     2004     2005   Domestic    $ (46,024 )   $ (5,250 )   $ 65,508   Foreign      54       (196 )     599                               $ (45,970 )   $ (5,446 )   $ 66,107                           The income tax (provision) benefit consists of the following, including continuing and discontinued operations (dollars in thousands):                         2003     2004     2005     Federal                   Current    $ —       $ 225     $ (1,245 )   Deferred      (52,539 )     1,886       9,200                                Total Federal      (52,539 )     2,111       7,955     State and Foreign      (7,035 )     (3,259 )     (2,629 )                                 $ (59,574 )   $ (1,148 )   $ 5,326                               Cash paid for state and foreign income taxes was $7.0 million, $2.9 million and $2.6 million for the years ended December 30, 2003, December 28, 2004, and December 27, 2005, respectively. Income taxes for discontinued operations are comprised solely of a portion of the state and foreign total above.  The differences between income taxes computed using the U.S. statutory Federal income tax rate of 35% and actual income tax (provision) benefit as reflected in the accompanying Consolidated Statements of Operations are as follows (dollars in thousands):                         2003     2004     2005     Expected Federal income tax benefit (provision)    $ 15,977     $ 1,906     $ (23,137 )   Effect of consolidated operations and income taxes of foreign and other entities not consolidated for Federal tax purposes      —         (69 )     210     State and foreign taxes, net of Federal benefit      (5,159 )     (2,613 )     (1,982 )   Change in valuation allowance for net operating loss carryforwards      (65,000 )     33,832       68,214     Change in valuation allowance for capital loss carryforwards      —         —         8,523     Expiration of net operating loss carryforwards      —         (33,775 )     (45,948 )   Other, net      (5,392 )     (429 )     (554 )                              Actual Federal income tax (provision) benefit    $ (59,574 )   $ (1,148 )   $ 5,326                               We had the following loss carryforwards available at December 27, 2005, which are available to offset future taxable income (dollars in thousands):                       Type of Carryforward    GrossAmount    Net Amount(before allowance)    ValuationAllowance    Net Amountin DeferredTax Asset    ExpirationDates (in years)   Regular tax operating loss    $ 450,826    $ 157,789    $ 76,845    $ 80,944    2006 - 2024   AMT net operating loss    $ 293,649    $ —      $ —      $ —      2007 - 2024    F-28    Table of Contents ClubCorp, Inc.    Since 1996, ClubCorp has recorded a deferred tax asset related to regular tax NOL carryforwards available for its use. The amount, calculated as 35% of the regular net operating loss carryforward above, is netted against deferred tax liabilities and classified as Other Assets or Other Liabilities in our Consolidated Balance Sheets. Each year, or when significant changes in our financial situation occur, we perform a valuation allowance analysis to determine the future recoverability of the asset. Historically, our analysis has been based on a future taxable income forecast utilizing past trends as well as future plans and predictions about our business.  We have recorded taxable losses in each of the prior five fiscal years not including the year ended December 27, 2005. In accordance with guidance in SFAS No. 109 and industry practice, because we have a pattern of taxable losses, we can not overcome that pattern and assume that we will have future taxable income. Therefore, we use more objective evidence in our evaluation, basing our analysis solely on carrybacks and future reversals of existing taxable temporary differences, as well as certain tax planning strategies. In 2003, we recorded a charge to operations of $65 million to write down the value of our NOLs to a balance of $77 million. In 2004, approximately $96 million of our gross NOL balance expired unused. The balance of our valuation allowance in 2003 anticipated this expiration and therefore, in 2004, no charge was recorded to operations and a corresponding adjustment was made to the valuation allowance. In 2005, we had taxable income of approximately $86.6 million, which included a capital gain from the sale of land at one of our properties. This allowed us to utilize our entire $24.4 million gross capital loss carryforward and approximately $62.2 million of our gross NOL balance which were both previously reserved in our valuation allowance. In addition, $131.3 million of our gross NOL balance expired unused at the end of 2005 but resulted in no charge to operations as it was fully reserved in our valuation allowance. Our capital loss and gross NOL carryforward balances were able to shelter 100% of the regular tax liability created by our current year taxable income. In addition, we were able to shelter the maximum allowed alternative minimum tax, or AMT, liability with available AMT NOL carryforward balances. The result was a remaining current AMT tax liability for $1.2 million. The AMT tax liability was recorded with an offsetting deferred tax asset that can be carried forward with an indefinite life to be applied against future unsheltered taxable income.  The components of the deferred tax assets and deferred tax liabilities at December 28, 2004 and December 27, 2005 are as follows (dollars in thousands):                     2004     2005     Deferred tax assets:              Regular tax operating loss carryforwards    $ 229,768     $ 157,789     Capital loss carryforwards      8,523       —       Other      31,866       36,039                        Total gross deferred tax assets      270,157       193,828     Valuation allowance for regular tax NOLs      (149,334 )     (76,845 )   Valuation allowance for capital losses      (8,523 )     —                               112,300       116,983     Deferred tax liabilities:              Property and equipment      1,696       (4,026 )   Discounts on membership deposits and acquired notes      120,012       122,059     Other      14,486       13,644                        Total gross deferred tax liabilities      136,194       131,677                        Net deferred tax liability    $ (23,894 )   $ (14,694 )                       F-29    Table of Contents ClubCorp, Inc.    Note 16. Selected quarterly financial data (unaudited)  Operations for the first three quarters consist of 12 weeks each and the fourth quarter includes 16 weeks for fiscal years 2004 and 2005.  Interim results are shown for consolidated totals (including discontinued operations) and are not necessarily indicative of fiscal year performance because of the impact of seasonal and short-term variations. A detail of continuing and discontinued operating revenues is provided as part of Revenue Recognition in Note 1. Selected quarterly financial data are summarized as follows (dollars in thousands, except per share data):                          Quarters       First     Second    Third    Fourth   Fiscal Year 2004                       Operating revenues    $ 184,967     $ 241,923    $ 222,482    $ 307,198         Income (loss) before income taxes and minority interest    $ (17,531 )   $ 8,746    $ 1,144    $ 2,195         Net income (loss)    $ (19,063 )   $ 8,312    $ 397    $ 4,112         Basic and diluted earnings (loss) per share    $ (0.20 )   $ 0.09    $ 0.00    $ 0.04         Fiscal Year 2005                       Operating revenues    $ 192,034     $ 258,236    $ 276,761    $ 311,061         Income (loss) before income taxes and minority interest (1)    $ (11,164 )   $ 15,517    $ 17,464    $ 44,290         Net income (loss) (1)    $ (11,955 )   $ 13,544    $ 16,785    $ 52,380         Basic earnings (loss) per share (1)    $ (0.13 )   $ 0.15    $ 0.18    $ 0.56         Diluted earnings (loss) per share (1)    $ (0.13 )   $ 0.14    $ 0.18    $ 0.56    (1) We sold land at one of our properties resulting in a pre-tax gain of $46 million during the fourth quarter of 2005 (Note 1, 11).    F-30    Table of Contents ANNEX A  LIST OF FACILITIES                        Property     Location          Business Type     Ownership      Country Club & Golf Facilities                  1    Diamante Country Club    Hot Springs Village    AR.    Private Country Club    Joint Venture  2    Gainey Ranch Country Club    Scottsdale    AZ.    Private Country Club    Owned  3    Braemar Country Club    Tarzana    CA.    Private Country Club    Owned  4    Canyon Crest Country Club    Riverside    CA.    Private Country Club    Owned  5    Chardonnay Golf Club    Napa    CA.    Private Country Club    Managed  6    Coto de Caza Golf & Racquet Club    Coto de Caza    CA.    Private Country Club    Owned  7    Crow Canyon Country Club    Danville    CA.    Private Country Club    Owned  8    Desert Falls Country Club    Palm Desert    CA.    Private Country Club    Owned  9    Granite Bay Golf Club    Granite Bay    CA.    Private Country Club    Joint Venture  10    Indian Wells Country Club    Indian Wells    CA.    Private Country Club    Owned  11    Mission Hills Country Club    Rancho Mirage    CA.    Private Country Club    Owned  12    Morgan Run Resort & Club    Rancho Santa Fe    CA.    Private Country Club    Joint Venture  13    Pasadera Country Club    Monterey    CA.    Private Country Club    Managed  14    Porter Valley Country Club    Northridge    CA.    Private Country Club    Owned  15    Shadowridge Country Club    Vista    CA.    Private Country Club    Owned  16    Spring Valley Lake Country Club    Victorville    CA.    Private Country Club    Owned  17    Stoneridge Country Club    Poway    CA.    Private Country Club    Managed  18    Aspen Glen Golf Company    Carbondale    CO.    Private Country Club    Owned  19    Countryside Country Club    Clearwater    FL.    Private Country Club    Owned  20    Deercreek Country Club    Jacksonville    FL.    Private Country Club    Owned  21    East Lake Woodlands Country Club    Oldsmar    FL.    Private Country Club    Owned  22    Hunter’s Green Country Club    Tampa    FL.    Private Country Club    Owned  23    Monarch Country Club    Palm City    FL.    Private Country Club    Joint Venture  24    Tampa Palms Golf & Country Club    Tampa    FL.    Private Country Club    Owned  25    Eagle’s Landing Country Club    Stockbridge    GA.    Private Country Club    Owned  26    Laurel Springs Golf Club    Suwanee    GA.    Private Country Club    Joint Venture  27    Northwood Country Club    Lawrenceville    GA.    Private Country Club    Owned  28    Knollwood Country Club    Granger    IN.    Private Country Club    Owned  29    Nicklaus Golf Club at LionsGate    Overland    KS.    Private Country Club    Joint Venture  30    Southern Trace Country Club    Shreveport    LA.    Private Country Club    Owned  31    Ipswich Country Club    Ipswich    MA.    Private Country Club    Owned  32    Oak Pointe Country Club    Brighton    MI.    Private Country Club    Owned  33    Canyon Gate Country Club    Las Vegas    NV.    Private Country Club    Owned  34    Firestone Country Club    Akron    OH.    Private Country Club    Owned  35    Quail Hollow Country Club    Painesville    OH.    Private Country Club    Owned  36    Silver Lake Country Club    Silver Lake    OH.    Private Country Club    Managed  37    Diamond Run Golf Club    Sewickley    PA.    Private Country Club    Owned  38    Treesdale Golf & Country Club    Gibsonia    PA.    Private Country Club    Owned  39    Country Club of Hilton Head    Hilton Head    SC.    Private Country Club    Owned  40    Woodside Plantation Country Club    Aiken    SC.    Private Country Club    Owned  41    Bluegrass    Hendersonville    TN.    Private Country Club    Leased  42    April Sound Country Club    Montgomery    TX.    Private Country Club    Owned  43    Atascocita Country Club    Humble    TX.    Private Country Club    Owned  44    Bay Oaks Country Club    Houston    TX.    Private Country Club    Owned  45    Brookhaven Country Club    Dallas    TX.    Private Country Club    Owned  46    Canyon Creek Country Club    Richardson    TX.    Private Country Club    Owned  47    Club at Cimarron    Mission    TX.    Private Country Club    Owned  48    Fair Oaks Ranch & Country Club    Fair Oaks Ranch    TX.    Private Country Club    Owned  49    Falcon Point Club    Katy    TX.    Private Country Club    Owned  50    Gleneagles Country Club    Plano    TX.    Private Country Club    Owned  51    Hackberry Creek Country Club    Irving    TX.    Private Country Club    Owned  52    Hearthstone Country Club    Houston    TX.    Private Country Club    Owned    Table of Contents ANNEX A  LIST OF FACILITIES                       Property     Location         Business Type     Ownership  53    The Hills Country Club at Lakeway    Austin    TX.    Private Country Club    Owned  54    Kingwood Country Club    Kingwood    TX.    Private Country Club    Owned  55    Las Colinas Country Club    Irving    TX.    Private Country Club    Owned  56    Lost Creek Country Club    Austin    TX.    Private Country Club    Owned  57    Oakmont Country Club    Corinth    TX.    Private Country Club    Owned  58    Ranch Country Club    McKinney    TX.    Private Country Club    Owned  59    Shady Valley Country Club    Arlington    TX.    Private Country Club    Owned  60    Stonebriar Country Club    Frisco    TX.    Private Country Club    Joint Venture  61    Stonebridge Country Club    McKinney    TX.    Private Country Club    Owned  62    Timarron Country Club    Southlake    TX.    Private Country Club    Owned  63    Trophy Club Country Club    Trophy Club    TX.    Private Country Club    Owned  64    Walnut Creek Country Club    Mansfield    TX.    Private Country Club    Owned  65    Wildflower Country Club    Temple    TX.    Private Country Club    Owned  66    Willow Creek Golf Club    Spring    TX.    Private Country Club    Leased  67    Greenbrier Country Club    Chesapeake    VA.    Private Country Club    Owned  68    Piedmont Golf Club    Haymarket    VA.    Private Country Club    Owned  69    River Creek Country Club    Leesburg    VA.    Private Country Club    Owned  70    Stonehenge Golf & Country Club    Richmond    VA.    Private Country Club    Owned  71    Vista Vallarta Club de Golf    Puerto Vallarta, Mexico        Private Country Club    Joint Venture  72    Marina Vallarta Club de Golf    Puerto Vallarta, Mexico        Private Country Club    Owned  73    Macquarie Links International Golf Club    Sydney, Australia        Private Country Club    Owned  74    Debary Golf & Country Club    Debary    FL.    Semi-Private Golf Club    Owned  75    Haile Plantation Golf & Country Club    Gainesville    FL.    Semi-Private Golf Club    Owned  76    Queens Harbour Country Club    Jacksonville    FL.    Semi-Private Golf Club    Owned  77    Nicklaus Golf Club at BirchRiver    Dahlonega    GA.    Semi-Private Golf Club    Joint Venture  78    Trophy Club of Gwinnett    Snellville    GA.    Semi-Private Golf Club    Owned  79    The Currituck Club    Corolla    NC.    Semi-Private Golf Club    Leased  80    Devil’s Ridge Golf Club    Holly Springs    NC.    Semi-Private Golf Club    Owned  81    Lochmere Golf Club    Cary    NC.    Semi-Private Golf Club    Owned  82    Nags Head Golf Links    Nags Head    NC.    Semi-Private Golf Club    Owned  83    The Neuse Golf Club    Clayton    NC.    Semi-Private Golf Club    Owned  84    Golden Bear Golf Club at Indigo Run    Hilton Head    SC.    Semi-Private Golf Club    Owned  85    Live Oak Golf Club    Austin    TX.    Semi-Private Golf Club    Owned  86    Yaupon Golf Club    Austin    TX.    Semi-Private Golf Club    Owned  87    Lakelands Golf Club    Gold Coast, Australia        Semi-Private Golf Club    Owned  88    North Lakes Golf Club    Brisbane, Australia        Semi-Private Golf Club    Owned  89    Isla Maya Golf Club    Cozumel, Mexico        Semi-Private Golf Club    Joint Venture  90    Airways Municipal Golf Course    Fresno    CA.    Public Golf    Leased  91    Aliso Viejo Golf Club    Fresno    CA.    Public Golf    Owned  92    Empire Ranch Golf Club    Folsom    CA.    Public Golf    Leased  93    Teal Bend Golf Club    Sacramento    CA.    Public Golf    Leased  94    Turkey Creek Golf Club    Lincoln    CA.    Public Golf    Leased  95    Eagle Ridge Golf Club    Summerfield    FL.    Public Golf    Managed  96    The Preserve Golf Club    Dunnellon    FL.    Public Golf    Managed  97    Bear’s Best Atlanta    Atlanta    GA.    Public Golf    Joint Venture  98    Bear’s Best Las Vegas    Las Vegas    NV.    Public Golf    Joint Venture  99    Bear Creek Golf Club    DFW Airport    TX.    Public Golf    Leased             Resorts                      Pinehurst Resort & Country Club    Pinehurst    NC.    Resorts    Owned      Barton Creek Resort    Austin    TX.    Resorts    Owned      The Homestead    Hot Springs    VA.    Resorts    Owned    Table of Contents ANNEX A  LIST OF FACILITIES                       Property     Location         Business Type     Ownership      Business & Sports Clubs                  1    Capital City Club - Montgomery    Montgomery    AL.    Business    Leased  2    Heritage Club    Huntsville    AL.    Business    Leased  3    Summit Club    Birmingham    AL.    Business    Leased  4    Center Club - Costa Mesa    Costa Mesa    AZ    Business    Leased  5    City Club on Bunker Hill    Los Angeles    CA.    Business    Leased  6    University Club Atop Symphony Towers    San Diego    CA.    Business    Leased  7    Centre Club - Tampa    Tampa    FL.    Business    Leased  8    Governors Club    West Palm Beach    FL.    Business    Leased  9    Tower Club - Ft. Lauderdale    Ft. Lauderdale    FL.    Business    Leased  10    University Club at Florida State University    Tallahassee    FL.    Business    Joint Venture  11    Buckhead Club    Atlanta    GA.    Business    Leased  12    First City Club    Savannah    GA.    Business    Leased  13    One Ninety One Club    Atlanta    GA.    Business    Leased  14    Plaza Club - Hawaii    Honolulu    HI.    Business    Leased  15    410 Club & Conference Center    Chicago    IL.    Business    Managed  16    Chicago Mercantile Exchange Club    Chicago    IL.    Business    Managed  17    Plaza Club - Chicago    Chicago    IL.    Business    Leased  18    Skyline Club - Indianapolis    Indianapolis    IN.    Business    Leased  19    Boston College Club    Boston    MA.    Business    Leased  20    University of Massachusetts Club    Boston    MA.    Business    Managed  21    Renaissance Club - Detroit    Detroit    MI.    Business    Leased  22    Skyline Club - Southfield    Southfield    MI.    Business    Leased  23    University Club of Jackson    Jackson    MS.    Business    Leased  24    Capital City Club - Raleigh    Raleigh    NC.    Business    Leased  25    Cardinal Club    Raleigh    NC.    Business    Leased  26    Carolina Club    Chapel Hill    NC.    Business    Managed  27    Piedmont Club    Winston-Salem    NC    Business    Leased  28    Bankers Club - Cincinnati    Cincinnati    OH.    Business    Leased  29    Shoreby Club    Bratenahl    OH.    Business    Managed  30    Pyramid Club    Philadelphia    PA.    Business    Leased  31    Capital City Club - Columbia    Columbia    SC.    Business    Leased  32    Commerce Club    Greenville    SC.    Business    Leased  33    Harbour Club    Charleston    SC.    Business    Leased  34    Club Le Conte    Knoxville    TN.    Business    Leased  35    Crescent Club    Memphis    TN.    Business    Leased  36    Nashville City Club    Nashville    TN.    Business    Managed  37    La Cima Club    Irving    TX.    Business    Leased  38    Plaza Club - Houston    Houston    TX.    Business    Leased  39    Plaza Club - San Antonio    San Antonio    TX.    Business    Leased  40    Tower Club - Dallas    Dallas    TX.    Business    Leased  41    University of Texas Club    Austin    TX.    Business    Leased  42    Tower Club - Tysons Corner    Vienna    VA.    Business    Leased  43    Town Point Club    Norfolk    VA.    Business    Leased  44    Columbia Tower Club    Seattle    WA.    Business    Leased  45    City Club of Washington    Washington    DC.    Business    Leased  46    Club at Franklin Square    Washington    DC.    Business    Leased  47    Capital Club    Beijing, China        Business    Joint Venture  48    Silicon Valley Capital Club    Fairfield    CA.    Business/Sports    Leased  49    Citrus Club    Orlando    FL.    Business/Sports    Leased  50    University Club of Jacksonville    Jacksonville    FL.    Business/Sports    Leased  51    Metropolitan Club - Chicago    Chicago    IL.    Business/Sports    Leased  52    Fairlane Club    Dearborn    MI.    Business/Sports    Managed  53    Capital Club - Columbus    Columbus    OH.    Business/Sports    Leased  54    Club at Society Center    Cleveland    OH.    Business/Sports    Leased    Table of Contents ANNEX A  LIST OF FACILITIES                       Property     Location         Business Type     Ownership  55    Dayton Racquet Club    Cleveland    OH.    Business/Sports    Leased  56    Rivers Club    Pittsburgh    PA.    Business/Sports    Leased  57    Greenspoint Club    Houston    TX.    Business/Sports    Owned  58    Houston Center Club    Houston    TX.    Business/Sports    Leased  59    Houston City Club    Houston    TX.    Business/Sports    Leased  60    Houston Metropolitan Racquet Club    Houston    TX.    Business/Sports    Leased  61    University Club of Houston    Houston    TX.    Business/Sports    Leased  62    Westlake Club    Houston    TX.    Business/Sports    Leased  63    San Francisco Tennis Club    Fairfield    CA.    Sports Club    Owned  64    Athletic & Swim Club    New York    NY.    Sports Club    Leased  65    Le Club    Milwaukee    WI.    Sports Club    Owned      EX-10.23 2 dex1023.htm AMENDED & RESTATED EMPLOYMENT AGREEMENT (J. A. BECKERT)   Amended & Restated Employment Agreement (J. A. Beckert)   Exhibit 10.23  AMENDED AND RESTATED EMPLOYMENT AGREEMENT  1. Parties, positions and employment status.  By the terms of this employment agreement (“Agreement”), ClubCorp USA, Inc. (“ClubCorp”) agrees to employ you, John Beckert, in the positions of President and Chief Executive Officer of ClubCorp and its parent ClubCorp, Inc., and in such other senior executive positions with ClubCorp or its Affiliates that the Chairman (“Chairman”) of the Board of Directors of ClubCorp (“Board”) may designate for you from time to time. You will report directly to the Chairman. This Agreement will become effective August 28, 2004 (the “Effective Date”) subject to approval by the Board and shall thereafter supersede and replace your Employment Agreement effective as of August 27, 2002, as subsequently amended. At all times you will be an employee at will, which means that either you or ClubCorp may terminate your employment at any time, with or without cause. (Definitions of most capitalized terms appear in the final section of this Agreement.)  2. Compensation.  (I) Retroactive to July 1, 2004, ClubCorp will pay you a base salary at the gross biweekly rate of twenty-two thousand, one hundred-fifteen dollars and thirty-eight cents ($22,115.38), subject to normal withholding, so that, if annualized, your gross base salary would be five hundred seventy-five thousand dollars ($575,000.00) (the “Base Salary”). Your Base Salary will be reviewed by the Board at least annually and may be increased at the discretion of the Board from time to time on or after July 1, 2005.  (II) Additionally, you will have the potential to earn an annual cash bonus payment (the “Annual Bonus”) in a target amount equal to your Base Salary, subject to normal withholding, depending on your performance against the financial objectives set in the Senior Executive Bonus Plan. (Your Annual Bonus could potentially exceed your Base Salary if you exceed certain goals set in whatever plan is in effect from time to time.) The compensation worksheet, attached as Exhibit A, describes the financial objectives of the Senior Executive Bonus Plan currently in effect. All Senior Executive Bonus plan terms and parameters are subject to change at the discretion of the Compensation Committee of the Board, provided that such changes will be applied to you in a manner no less favorable than to other ClubCorp senior executives and that they will be communicated to you in advance of their effective date and take effect no earlier than the start of a next compensation year.  (III) You will be entitled to participate in any long-term, incentive, deferred, or similar compensation plans or arrangements, to the extent such plans or arrangements are offered from time to time by ClubCorp, on terms and conditions comparable to those applicable to other ClubCorp senior executives.  3. Stock options.  (I) As soon after the Effective Date as practicable, you will receive a non-qualified stock option grant under the Stock Plan for two hundred thousand (200,000) shares of ClubCorp, Inc. stock, with an Exercise Price of the Fair Market Value of ClubCorp, Inc. stock as of July 1, 2004. The right to exercise the foregoing options shall vest in increments of 20% of the total original grant on July 1 of each subsequent year. Subject to having achieved your 2004 performance objectives which shall mean achieving one hundred percent (100%) of ClubCorp’s 2004 plan, you will receive an additional option grant as soon as practicable after January 1, 2005 of two hundred thousand (200,000) shares, with an Exercise Price of the Fair Market    Value of ClubCorp, Inc. stock as of January 1, 2005 and with such options to vest in increments of 20% of the total grant on January 1 of each subsequent year. It is intended that these grants will cause your total share ownership including options to equal approximately 1.5% of the ClubCorp, Inc. common stock issued and outstanding. It is not presently contemplated that any additional options will be granted unless significant transactions cause the number of shares outstanding of ClubCorp, Inc. common stock issued and outstanding to materially change. Nothing in this Agreement shall limit or restrict rights you may have had, including vesting rights, with respect to stock options awarded prior to the Effective Date.  (II) If the Board should approve a restricted stock plan, you will be eligible to convert up to one-third (1/3) of your stock options into restricted stock with economic and vesting terms and tax consequences no less favorable than those applicable to the underlying stock options so converted. A copy of the prospectus, which incorporates the Stock Plan document and sample stock option agreement is attached as Exhibit B.  4. Vacation.  You will retain any vacation time accrued but unused prior to the Effective Date, and thereafter you will continue to accrue twenty (20) days’ vacation each calendar year of your employment. The terms of your use and retention of accrued vacation time will be governed by ClubCorp policies in effect from time to time.  5. Benefits.  (I) As of the Effective Date, you will be eligible to participate in all health, life, dental and long-term disability benefits programs that ClubCorp may offer from time to time to its other senior executives, including any medical and dental coverage available for dependants, and in any ClubCorp investment plans in effect from time to time for other senior executives.  (II) You will continue to receive, at no charge, a Board Level Associate Clubs and Resorts membership as well as the opportunity to join a local ClubCorp club of your choice without a requirement for the payment of an initiation fee and without the requirement for the payment of dues during the time of your employment.  (III) You will receive free parking at ClubCorp’s headquarters facility.  (IV) During your employment, subject to eligibility requirements and Evidence of Insurability approval by the carrier, ClubCorp will provide, at its sole expense, a supplemental term life insurance policy in a benefit amount of no less than $500,000 payable to such beneficiary or beneficiaries as you may designate.  6. Expense reimbursement.  ClubCorp will reimburse all reasonable and necessary expenses incurred by you on behalf of ClubCorp and the Affiliates, so long as you incur and submit the expenses in compliance with applicable ClubCorp policies and procedures. In addition, ClubCorp will reimburse you for up to Ten Thousand Dollars ($10,000) in legal fees incurred in connection with the review and negotiation of your employment and stock option agreements.  7. Board position.  You will remain a Board member for the duration of your employment as President/Chief    2    Executive Officer. Upon the termination of your employment, whether voluntary or involuntary, your membership on the Board will automatically terminate unless otherwise agreed in writing with ClubCorp.  8. Rules, policies and procedures.  You agree to comply in all material respects with all reasonable rules, policies and procedures of ClubCorp, the Affiliates and any club of which you become a member as reflected in the ClubCorp Employee Partner Handbook and similar written employee guidelines applicable to your position.  9. Termination by CIubCorp other than for Cause or Resignation with Good Reason.  If ClubCorp or any successor terminates your employment other than for Cause, death or disability or if you resign your employment with Good Reason, then:  (I) You will receive your Base Salary for all days worked up to and including your last date of employment and payment for any accrued but unused vacation days pursuant to ClubCorp Policies;  (II) all of your unvested stock options will be automatically vested effective on the day immediately preceding the termination date;  (III) contingent on your signing and delivering a general release and waiver of claims in a form reasonably acceptable to ClubCorp and its Affiliates you will also receive twenty-four (24) months of Base Salary and an additional amount equal to the Annual Bonus you received in the preceding calendar year.  (IV) you will not be entitled to any other payments, compensation or benefits of any sort under this Agreement or otherwise except as may be vested under the terms of a controlling benefit plan or program. Amounts payable under this Section 9 will be paid in the form of income continuation payments. Continuation of Base Salary will be paid at the rate in effect at the time of your termination. Amounts payable under this Section 9 will be made at such times and in such manner as consistent with ClubCorp’s normal payroll practices and will be subject to standard withholdings.  10. Termination by ClubCorp for Cause.  If ClubCorp terminates your employment with Cause, you will be entitled to receive your Base Salary for all days worked up to and including your last date of employment and payment for any accrued but unused vacation days according to ClubCorp policy. You will not, however, be entitled to any prorated portion of the Annual Bonus or any other payments, compensation or benefits of any sort under this Agreement or otherwise except as may be vested under the terms of a controlling benefit plan or program. All of your vested and unvested stock options will be governed by the Stock Plan. Except as otherwise provided, all of ClubCorp’s obligations under this Agreement will immediately cease.  11. Death or disability.  If you die or become disabled your employment will immediately cease. Disability for purposes of this section shall mean that you qualify for benefits under ClubCorp’s current disability benefit plan or any successor plan. Upon termination for death or disability, you will be    3    entitled to receive your Base Salary for all days worked up to and including your last date of employment and payment for any accrued but unused vacation days. You will also receive an additional amount calculated by multiplying the amount of the Annual Bonus you received in the preceding calendar year by the fraction of the current year completed prior to your date of termination. Except as may be vested under the terms of a controlling benefit plan or program and as otherwise provided herein, you will not be entitled to any other payments, compensation or benefits of any sort under this Agreement or otherwise and all of ClubCorp’s obligations under this Agreement will immediately cease. All of your vested and unvested stock options will be governed by the Stock Plan.  12. Resignation Absent Good Reason.  If you voluntarily resign without Good Reason, you will be entitled to receive your Base Salary for all days worked up to and including your last date of employment and payment for any accrued but unused vacation days. You will not, however, be entitled to any prorated portion of the Annual Bonus or any other payments, compensation or benefits of any sort under this Agreement or otherwise except as may be vested under the terms of a controlling benefit plan or program. Except as otherwise provided, all of ClubCorp’s obligations under this Agreement will immediately cease. All of your vested and unvested stock options will be governed by the Stock Plan.  13. Change of Control.  (I) If there is a Change of Control of ClubCorp, all of your vested and unvested stock options will be deemed to have automatically vested on the date immediately prior to the date of such Change of Control.  (II) If any payments under this Agreement or under other plans, programs, or agreements with ClubCorp are subject to excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended from time to time, or any successor provision (the “Code”), ClubCorp will pay you an additional amount (the “Gross Up”), calculated and payable as described in Exhibit C, such that the net amount retained by you after deductions of any such excise tax and any income and employment taxes, social security tax, excise tax, interest or penalties imposed on such amounts paid under this section shall be equal to the full amount of the intended payment or benefit. In the event Section 5.3 of the Omnibus Stock Plan applies to you resulting in a reduction of a “parachute payment” you are otherwise entitled to receive, ClubCorp will pay you a Gross Up amount as described in Exhibit C.  14. Employee non-solicitation.  Our employees are our most important asset. As the result, for one year after your last date of employment, regardless of the reason for the ending of your employment, you agree not to, on behalf of yourself or any other person or entity, solicit for hire or retain any person who was, at any time during the last twelve months of your employment with ClubCorp or its Affiliates, employed by ClubCorp or any Affiliate in a position at or above the level of club manager or level nine at ClubCorp headquarters.  15. Confidentiality.  ClubCorp has provided you with substantial Confidential Information and, hereafter, will continue to provide you with Confidential Information. ClubCorp has invested much time, money and effort in developing this Confidential Information, and it has helped ClubCorp    4    become the leader in the private club and golf resort business. Our competitors would like to be able to obtain this information without having to invest the same time, money and effort to develop it. For that reason, it is critical that the Confidential Information remain confidential. All Confidential Information is the sole property of ClubCorp and its Affiliates. While employed and after you leave your employment, you agree not to disclose or use the Confidential Information. You also agree to return to ClubCorp immediately upon the ending of your employment, regardless of the reason for the ending of your employment, all of the written or recorded Confidential Information that is within your possession or control, including all copies of it.  16. Inventions and works for hire.  You hereby irrevocably assign to ClubCorp all of your right, title and interest in and to any and all inventions and intellectual property, of any sort that relate in any way to ClubCorp’s or its Affiliate’s business, whether tangible or intangible, that you may discover, develop, invent, compile or write while you are employed by ClubCorp or its Affiliates. This provision applies regardless of whether you discover, develop, invent, compile or write it during business hours or on or off of ClubCorp’s or its Affiliates’ premises. You agree to take any actions, including the execution of documents or instruments, that ClubCorp may reasonably require to give effect to this assignment. You represent that you currently have no rights in any inventions or intellectual property that relate in any way to ClubCorp’s or its Affiliates’ business.  17. Covenant not to compete.  ClubCorp must protect the interests set out in the Confidentiality section of this Agreement. In addition, ClubCorp has a significant interest in, among other things, ensuring that you do not acquire a valuable ownership interest in ClubCorp as the result of ClubCorp’s Stock Plan and then act in a fashion that would assist ClubCorp’s or its Affiliates’ competitors in efforts to weaken ClubCorp’s competitive position and, thereby, decrease the value of ownership for other, loyal employees and former employees. As the result, in return for ClubCorp’s providing you with the Confidential Information, and as a precondition to your eligibility to acquire stock ownership in ClubCorp or any Affiliate, you agree that while you are employed and for two years from your last date of employment with ClubCorp or any Affiliate due to resignation without Good Reason or termination for Cause, you will not, anywhere in the United States, Europe, Asia or Australia:  (I) perform executive management services, in any capacity, or serve on the board of directors for any Competitor;  (II) solicit or accept business from any Customer to the extent such business is substantially similar to business solicited or accepted by ClubCorp or any Affiliate with respect to such Customer; or  (III) own any interest in any Competitor, except that, when you are no longer employed by ClubCorp or any Affiliate, you may own less than five (5) percent of the publicly traded stock of a Competitor.  Notwithstanding the above, in the event that you are terminated without Cause or resign with Good Reason, then the time period for the Non-Compete will be the length of time during which you receive income continuation severance payments under Section 9.    5    18. Non-disparagement.  You agree that you will not, at any time during your employment or while receiving income continuation severance payments under Section 9, say, publish or cause to be published anything that casts ClubCorp or the Affiliates in an unfavorable light, or that disparages or injures their good will or business reputation; provided, however, that nothing in this Agreement will limit your ability to make statements with respect to ClubCorp or the Affiliates in the context of litigation to preserve or enforce your rights with respect hereto or as may be required by process of law.  19. Related stock agreements and plans.  In the event that you breach any of your obligations under the “Employee non-solicitation,” “Confidentiality,” “Inventions and works for hire,” and “Covenant not to compete” provisions of this Agreement, you agree that, upon notice of such breach, you will retain all shares of ClubCorp stock that are then in your possession or control or, if such shares are subsequently sold, the proceeds from such sale, until a final determination as to such breach. In the event of a final award of damages in ClubCorp’s favor, such award may be satisfied, at ClubCorp’s election, by return to ClubCorp of such shares valued at the then current value thereof (or the proceeds of such shares) to the extent necessary to satisfy the award. Additionally, ClubCorp will be entitled to pursue any other remedies allowed by law or in equity.  20. Supersedes any prior agreements.  This Agreement supersedes any and all other agreements or offers, either oral or in writing, between you and ClubCorp related to the subject matter hereof. In the event of any conflict between the terms of this Agreement and any stock option agreement or plan, whenever entered into, the terms of this Agreement shall control.  21. Amendments must be in writing.  Except as otherwise provided in this Agreement, no amendment or modification of this Agreement shall be deemed effective unless and until executed in writing by all of the parties hereto.  22. Texas law applies to this Agreement.  Because your employment could take you to any number of states or countries and because it is important to you and ClubCorp to be able to have some certainty that this Agreement will be applied consistently wherever you may work, ClubCorp and you agree that the substantive law of Texas will govern this Agreement, without giving effect to any conflict of law principles that would require the law of another jurisdiction to apply.  23. Successors and Assigns.  This Agreement is intended to bind and inure to the benefit of and be enforceable by you and ClubCorp and each parties’ respective heirs, representatives, executors, successors and assigns, except that you may not assign your duties hereunder without the consent of ClubCorp.    6    24. Notices.  Any notices that either you or ClubCorp are required to give under the terms of this Agreement may be given in writing, either by personal delivery, facsimile or by registered or certified mail, postage prepaid with return receipt requested. Mailed or faxed notices must be sent to the following addresses:          If to CIubCorp:    Mr. Robert H. Dedman, Jr.      Chairman, ClubCorp, Inc.      3030 LBJ Freeway, Suite 700      Dallas, Texas 75234       Phone No.: (972) 888-7380 Facsimile No.: (972) 888-7717     If to you:    Mr. John Beckert      4920 Seneca Drive Dallas, Texas      Phone No.: (214) 352-1601  Any party may change his or its address by written notice. Notices delivered personally or by facsimile will be deemed communicated as of actual receipt. Mailed notices will be deemed communicated as of three (3) days after proper mailing.  25. Definitions used in this Agreement.  (I) “Affiliates”: Collectively, all ClubCorp subsidiaries and any entity in which ClubCorp or any ClubCorp subsidiary, directly or indirectly, has a controlling ownership interest.  (II) “Cause”:  (a) Your failure substantially to perform your reasonable, material assigned duties hereunder, that remains uncured thirty (30) days’ after written notice of such failure by the Chairman or the Board identifying the performance deficiencies; or  (b) (i) fraud, embezzlement, or theft; (ii) conviction of a felony; (iii) conduct that, in the reasonable judgment of the Board, subjects ClubCorp to material public embarrassment or disrepute; (iv) willful harassment or discrimination in violation of ClubCorp policies; or (v) any material violation of ClubCorp policies or this Agreement; provided that, in the case of (iii) or (v), your conduct either subjects ClubCorp to immediate, substantive damage or, in the absence of such damage, continues after thirty (30) days’ written notice by the Chairman or the Board identifying the violation.  (III) “Change of Control”: This term will have the same meaning as in the Stock Plan.  (IV) “Competitor”: Any person or entity, the principal business of which is or is intended to become the ownership, management or provision of consulting services to three or more private clubs, golf facilities or golf resorts anywhere in the United States, Europe, Asia or Australia in a substantially similar manner as such business is conducted by ClubCorp or its Affiliates.  (V) “Confidential Information”: All trade secrets of ClubCorp and the Affiliates and any information or item that does not qualify under applicable law as a trade secret but to which ClubCorp or the Affiliates limit access, to any extent, either internally or externally, including but not limited to information and items related to plans, strategies, inventions, devices, services, products, processes, properties, assets, customers, customer lists, customer preferences,    7    markets, marketing strategies, management, employees, technology, know-how, financial conditions or prospects, employee compensation, fee information, cost information, pricing information, business development plans and strategies, marketing plans and strategies, instructional methodology and techniques, computer software, specifications and code, sources of supply, products or services, designs, analyses, drawings, photographs and reports, computer operating systems, applications and program listings, flow charts, manuals, documentation, databases, accounting and business methods, production procedures, or merchandising systems. Notwithstanding the foregoing, “Confidential Information” does not include (a) information that is or becomes publicly available (except through disclosure by you in violation of this Agreement or through disclosure by any other person or entity in violation of a written agreement or common law duty, (b) information that was known to you prior to the Start Date, and (c) information that may be required to be disclosed by law or legal process.  (VII) “Customer”: Any person or entity with whom ClubCorp or any Affiliate, with your assistance and within one year prior to your last date of employment, had, was negotiating to have, or had taken substantial steps in furtherance of having a contractual relationship for the ownership or management of any private club, golf facility or golf resort.  (VIII) “Exercise Price”: This term will have the same meaning as in the Stock Plan.  (VIII) “Fair Market Value”: This term will have the same meaning as in the Stock Plan  (IX) “Good Reason”: This term will mean the occurrence of any of the following:  (a) a failure of ClubCorp to perform any material obligation under this Agreement or any stock option or other agreement governing the terms and conditions of your employment that remains uncured thirty (30) days after written notice by you identifying such failure;  (b) material diminution of your title, duties, responsibilities, authority, or base compensation, or;  (c) involuntary relocation of the site of your work to a location outside a 50 mile radius from ClubCorp’s current offices at 3030 LBJ Freeway in Dallas, Texas.  (X). “Stock Plan”: The ClubCorp, Inc. Omnibus Stock Plan, as amended.  [Signatures Appear on Following Page]    8           JOHN BECKERT     /s/ John A. Beckert  Signature     John A. Beckert  Printed    CLUBCORP USA, INC.     By:    /s/ Robert H. Dedman, Jr.     Signature         Robert H. Dedman, Jr.     Printed         Chairman of the Board     Title    9    EXHIBIT C  (1) For purposes of determining the Gross Up in Section 13 of this Agreement, you will be deemed to pay federal, state, and local income tax at the highest marginal rate applicable in the calendar year in which the payment is made. The determination of whether excise tax is payable, including whether any exception may apply, and if so the amount thereof, will be made upon the opinion of tax counsel selected by ClubCorp and reasonably acceptable to you, applying the following rules: (a) all payments will be treated as “parachute payments” within the meaning of Section 280G(b)(2) of the Code, and all “excess parachute payments” within the meaning of Section 280G(b)(1) of the Code will be treated as subject to excise tax unless in the opinion of counsel such payments do not constitute parachute payments or such excess parachute payments represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the “base amount” within the meaning of Section 280G(b)(3) of the Code or are otherwise not subject to excise tax; and (b) the value of any non-cash or deferred payments or benefits will be determined by an independent accounting firm selected by ClubCorp and reasonably acceptable to you in accordance with the principles of Section 280G(d)(3) and (4) of the Code. All fees, costs, and expenses of tax counsel and any accounting firm or other advisor retained in accordance with this paragraph will be paid solely by ClubCorp.  (2) The Gross Up, if any, will be paid in a lump sum cash payment within 30 days after the date on which the amount thereof has been determined or is reasonably determinable by tax counsel, and in any event not later than 45 days following a termination of your employment; provided, however, that if the amount of Gross Up cannot be finally determined at or before such time, the amount paid will be the estimated full amount of the Gross Up as reasonably determined by tax counsel in good faith and in accordance with the principles of the preceding paragraph. If such an estimated Gross Up is paid, or if the opinion of tax counsel is not finally accepted by the Internal Revenue Service, then appropriate adjustments will be computed (with additional Gross Up, if necessary) by tax counsel based upon the final amount of excise tax, and any additional amount due you as a result of such adjustment (including any interest or penalties owed by you by reason of any underpayment) will be paid in cash and in a lump sum within 30 days of such computation. Any amount due ClubCorp as a result of such an adjustment will be paid by you in cash in a lump sum within 30 days of such computation.    10      EX-10.24 3 dex1024.htm INCENTIVE PLAN   Incentive Plan   Exhibit 10.24     Incentive Plan for  Home Office and Division  Employee Partners  2005    TABLE OF CONTENTS               Page   Introduction        3      Important Terminology        4-5      General Plan Policy and Procedures          Eligibility        6   Incentive Plan Guidelines        7   Administration        7-8   Schedule of Incentive Awards        8      Incentive Components          Home Office and Division Employee Partners       Financial Goals        9   Individual Performance Goals        9      Tables       1. Incentive Plans Summary Spreadsheet by group        10   2. ClubCorp Financial Goal Payout Scales        11   4. Division Financial and Membership Goal Scales        12   5. Individual Performance Goal Payout Scale        13   6. Individual Performance Definitions        14   7. Award Calculation Examples        15-16    Page 2    INTRODUCTION  Congratulations on your participation in the Home Office and Division Employee Partner Incentive Plan. Your contributions are key to both your and the Company’s success. This is a comprehensive and competitive plan designed to use financial incentives to reward those who meet and exceed expectations and cause results.  The purpose of this plan is to support the critical goals of the Company by setting compensation targets that recognize levels of responsibility within the organization, consider external competitive factors and measure the caliber of performance as compared to pre-established and mutually agreed upon goals.  The plan focuses on the following:        •   Financial and Membership Goals (set at the beginning of each year):        •   ClubCorp EBITDA versus the Budgeted Goal        •   Division Financial Performance versus the Budget Goal        •   Division Net ID/Fee and/or Total Dues Income versus Budgeted Goal        •   Other specific defined goals based on area of responsibility        •   Individual Performance Goals (Subjective review of individual performance - goals set individually for each half of the year.)  (See Table 1 for Incentive Plans Summary Spreadsheet by Group for specific details.)  The Company is committed to providing competitive compensation that adheres to:        •   Total compensation programs that strengthen the relationship between pay and performance by emphasizing at-risk components of pay consisting of annual and long-term incentives.        •   At-risk components of pay to be dependant upon the successful achievement of specific financial and individual performance goals.        •   Base salaries to be targeted at the market median.        •   If desired results are achieved, total compensation to be paid at above market median levels  By working to impact these specific areas, you can contribute to your success, the success of your individual club and the Company, as well as increase your personal compensation.    Page 3    IMPORTANT TERMINOLOGY  “Actual Eligible Earnings” - Base pay, vacation, jury duty and other categories for regular wages paid during an incentive period. It does not include incentive/bonus awards, relocation, or other pay not considered as part of regular wages.  “Annual” – Refers to a fiscal year.  “Award” - The incentive compensation paid (in cash) as a result of achievement from goals outlined in this plan.  “Base Pay Range” – The range serves as a guideline for each grade level and is determined based on the market base pay for a position within that level from minimum to maximum.  “Blue Chip” Plan – The performance objectives expected from the position.  “Company” - ClubCorp, Inc.  “EBITDA” – Earnings before Interest, Taxes, Depreciation and Amortization  “Employer” – Each affiliate, who is designated by the Operations Committee as an Employer under this plan.  “GOP” - Gross Operating Profit represents Total Operating Revenue of an entity or region less Total Operating Expenses as defined in the Company’s Statement of Operations.  “ID” – Initiation Deposits represent the initial payment required to purchase a membership at a club. An ID is typically refundable in 30 years, may or may not be transferable and is supported by a signed contract and application. ID numbers are based on net of refunds.  “IF” - Initiation Fees represent an initial payment required to purchase a membership at a club. Amounts are typically non-refundable and non-transferable.  “Incentive Period” - The period of time being measured for purposes of award determination.  “Incentive Plan” – The details outlined in this document, all tables and any amendments added from time to time, which supersede all prior compensation and incentive plans.  “Incentive Potential” - The amount equal to a percentage of base pay that is variable in nature and is awarded upon the achievement of financial goals measured annually and individual performance goals measured semi-annually.    Page 4    “Individual Performance Goals” – Calculated based on 60% Blue Chips and 40% Leadership Competencies.  “Leadership Competencies” – Those leadership qualities that we expect to be modeled by all the leaders in our organization. (Applicable to supervisory positions and above.)  “Level” - A designation assigned to each Home Office and Division position based on a variety of different components of a position, i.e. responsibilities, accountabilities, level of impact to company, etc.  “Participant” - An Employee Partner of the Company or an Employer who is designated by the Operations Committee to become a participant in Incentive Plan program.  “Summary Plan Document” – (SPD) – A detailed document outlining the compensation plan for a specified position.  “Termination for cause” – Termination of employment related to violation of policy or policies of the Company or Employer. Includes engagement in any act involving willful dishonesty, disloyalty, or infidelity against the Company or Employer.  “Total Dues Added” – All dues earned by an entity, as defined in the Membership Sales Plan. Total Dues Added includes, Associate Gold Dues, Society Dues, Signature Gold, etc.  “Total Dues Income” – All dues earned by an entity as defined in the Company’s Statement of Operations. Total Dues Income includes Dues, Associate Gold Dues, Life & TAMS Dues Recognized and Society Net Income.  “Total Dues Lost” - All dues removed or resigned from entity, as defined in the Membership Sales Plan. Total Dues Lost includes loss of all dues categories.    Page 5    GENERAL PLAN POLICY & PROCEDURES  Information contained in this plan and promises made by management do not constitute an implied or expressed contract or binding agreement between Employer and Employee Partner. The Operations Committee reserves the right to change, modify, alter or eliminate any incentive plan at any time. As of January 1, 2005, this Home Office and Division Employee Partner Incentive Plan supersedes all prior management compensation or incentive plan documents.  The Home Office and Division Employee Partner Incentive Plan is designed to encourage focus on the critical elements of the Home Office and Division positions and to recognize and reward company financial performance with unlimited incentive potential, as well as subjective individual performance incentive potential.  Eligibility        •   Home Office and Division Employee Partners can be participants in the Incentive Plan based on company grade level or otherwise appointed by the Operations Committee to be a participant in the ClubCorp Incentive Plan.        •   Termination of employment (voluntary or involuntary) before the end of the incentive period will result in forfeiture of any award.        •   All Home Office and Division Employee Partners who complete the incentive period will be eligible for awards unless terminated for cause.        •   If a Home Office or Division Employee Partner changes responsibilities during the year, the award for each plan will be calculated based on the actual eligible earnings as of the date of the change in each position.        •   Any Home Office or Division Employee Partners hired within 30 days of the end of an incentive period will not receive an award for that incentive period. Actual eligible earnings during this time period will be added to the next incentive period and considered with the following periods award calculation.        •   Awards will be calculated based on the actual eligible earnings in the position.    Page 6    Incentive Plan Guidelines             BASE PAY                                          INCENTIVE POTENTIAL  The Incentive Plan is an additional amount paid based on a percentage of base pay. The actual award calculation will be determined based on the actual eligible earnings in the position for the given incentive period.  Each Home Office and Division Employee Partner’s position will have a grade level classification assigned. Home Office and Division positions will have guidelines for incentive potentials for each level based on the following table:           Incentive Targets *        Level 12+    50 %+      Level 11    40 %      Level 10    30 %      Level 9    25 %      Level 8    20 %      Level 6 & 7    10 %      * Targets are only guidelines and only applicable for eligible positions  All participants in the Home Office and Division Employee Partner Incentive Plan will receive an Individual Compensation Worksheet to define their Incentive Plan and the goals associated.  Administration  Awards will be calculated based upon actual eligible earnings while in an eligible position and will consist of multiple components: achievement of financial, membership and/or other specific defined goals based on area of responsibility and individual performance goals.  Annual goals will be determined at the beginning of each fiscal year. Annual awards will be calculated following the completion of the fiscal year.    Page 7    Individual Blue Chips will be established at the beginning of each six-month period. A performance review of the “Blue Chips” (60%), as well as the Leadership Competencies* (40%), will be completed and submitted following the review period to determine the award for the Individual Performance Goal.      * Applicable to supervisory positions and above  Schedule of Incentive Awards  Incentives awards are paid:        •   Annually for the financial, membership and other specific defined goals based on area of responsibility.        •   Semiannually for the Individual Blue Chips and Leadership Competencies (paid following the first half of the year and with the annual award for second half of year.)        •   Based on actual eligible earnings in the position.  All incentive awards are subject to federal, state and local taxes required by law and elected contributions to the investment plans (if applicable) to be withheld when paid.    Page 8    INCENTIVE COMPONENTS  The Home Office and Division Employee Partner Incentive Plan is divided between financial, membership and/or other specific defined goals based on area of responsibility and individual performance goals. The incentive award will be based on achievement of goals in each category. Each goal is separate (independent) and the ability to achieve an award in one category does not affect the ability to achieve an award in another category. See Table 1 for Incentive Plan Summary by Group details.  All goals will have a minimum threshold of performance to achieve any award and the financial and some membership goal(s) will have an unlimited ability to increase the award for overachievement. Individual performance results have the ability to achieve up to 120% of incentive potential. (See specific scales for details.)  Home Office and Division Employee Partners  Financial and Membership Goals (see Table 2.1 and Table 2.2)        •   All Home Office and Division Employee Partners will have one component of their Incentive Plan tied to the Budgeted ClubCorp EBITDA Goal set at the beginning of the fiscal year.        •   Division Employee Partners and some Home Office Employee Partners will have a component based on Division financial performance, membership targets and/or other specific defined goals based on area of responsibility.        •   Division Employee Partners and some Home Office Employee Partners may include a roll up of the division’s Net ID/Fee and/or Total Dues Income line as a component.  Individual Performance Goals (see Table 2.3)  Employee Partner Individual performance goals will be established twice a year and reviewed following each six-month period. This component comprises a portion of the annual Incentive Potential and the award (calculated based on actual eligible earnings) will be given following the six-month review.  The individual performance scores are calculated based on the two components below: (One score will be calculated based on each component score)        •   60% based on Blue Chip score        •   40% based on Leadership Competencies score *  (See Table 3.1 for Performance score definitions)      * Applicable to supervisory positions and above    Page 9    TABLE 1  INCENTIVE PLAN SUMMARY  BY GROUP                 Group     ClubCorpEBITDA     Reporting Business Operating Unit    *IndividualPerformance   Operations Committee                       CEO/President    100%                   Other Ops Committee    60%            40%         SVP Operations    25%     40% **Div GOP + Div Overhead and Society     10% Div ID/Fees and/or Net Total Dues Income    25%         VP Operations/Sr Regional Managers    25%     40% **Div GOP + Div Overhead and Society     10% Div ID/Fees and/or Net Total Dues Income    25%         Managing Directors (International)    25%     40% Div GOP + Div Overhead     10% Div ID/Fees and/or Net Total Dues Income    25%         Director Financial Management and VP People Strategy    25%     25% **Div GOP + Div Overhead and Society     10% Div ID/Fees and/or Net Total Dues Income    40%         Divisional Staff - Dom    10%     40% **Div GOP + Div Overhead and Society     10% Div ID/Fees and/or Net Total Dues Income    40%         VP Membersip/Divisional Specialist, Membership/Sales    5%     10% Div GOP     60% Specific to area(s) of responsibility    25%     10%     OR 15%    50%    25%         Regional Staff - Intl    10%    50%    Specific Targets    40%              Defined by MD             Home Office Membership    20%    40%     Total Company Dues Added    40%   Home Office Staff     Grades 7-9 40%            60%         (Incentive Eligible Positions)     Grades 10-12 50%            50%         Club Managers - Dom        75%     Combination of GOP, ID & Fees, Total Dues Inc.    25%         Regional Club Managers - Dom        50%     Rollup of Reg GOP for specific clubs    50%         Club Managers - Intl        75%     Specific Targets Defined by MD    25%         Society Manager        75%     Budgeted Net Income & Net Dues    25%    * Semi-Annual payout applies    ** Modified GOP scale used for Business and Sports clubs    Page 10    TABLE 2.1  CLUBCORP EBITDA  PAYOUT SCALES            CLUBCORP EBITDA        % of Budget Achieved     Incentive Payout     Below 91%    0 %               91%    5 %               92%    10 %               93%    20 %               94%    30 %               95%    40 %               96%    48 %               97%    56 %               98%    64 %               99%    72 %             100%    80 %             101%    84 %             102%    88 %             103%    92 %             104%    96 %             105%    100 %             106%    105 %             107%    110 %             108%    115 %             109%    120 %             110%    125 %             111%    130 %             112%    135 %             113%    140 %             114%    145 %             115%    150 %    Unlimited Potential      Page 11    TABLE 2.2  DIVISION FINANCIAL AND MEMBERSHIP  GOAL  PAYOUT SCALES                 DIVISION GOP & NET ID/FEES     TOTAL DUES INCOME     % of Budget Achieved    Incentive Payout      % of Budget Achieved      Incentive Payout    Below 91%   0 %   Below 91 %   0 %  91%   3 %   91 %   3 %  92%   6 %   92 %   6 %  93%   11 %   93 %   11 %  94%   18 %   94 %   18 %  95%   25 %   95 %   25 %  96%   36 %   96 %   36 %  97%   47 %   97 %   47 %  98%   58 %   98 %   58 %  99%   69 %   99 %   69 %  100%   80 %   100 %   80 %  101%   84 %   101 %   90 %  102%   88 %   102 %   100 %  103%   92 %   103 %   103 %  104%   96 %   104 %   107 %  105%   100 %   105 %   110 %  106%   103 %   106 %   114 %  107%   107 %   107 %   117 %  108%   110 %   108 %   121 %  109%   114 %   109 %   124 %  110%   117 %   110 %   128 %  111%   120 %   111 %   131 %  112%   124 %   112 %   135 %  113%   127 %   113 %   138 %  114%   131 %   114 %   142 %  115%   135 %   115 %   145 %  116%   138 %   116 %   149 %  117%   142 %   117 %   152 %  118%   145 %   118 %   156 %     Unlimited Potential for GOP and up to 125%of plan payout for Net ID/Fees      Unlimited Potential      Page 12    TABLE 2.3  INDIVIDUAL PERFORMANCE GOAL  PAYOUT SCALES            2005 Individual Performance Scale    Rating   Payout %    Below 3.0   0 %              3.0   10 %              3.1   20 %              3.2   30 %              3.3   40 %              3.4   50 %              3.5   70 %              3.6   72 %              3.7   74 %              3.8   76 %              3.9   78 %              4.0   80 %              4.1   84 %              4.2   88 %              4.3   92 %              4.4   96 %              4.5   100 %              4.6   104 %              4.7   108 %              4.8   112 %              4.9   116 %              5.0   120 %    Page 13    TABLE 3.1  INDIVIDUAL PERFORMANCE  RATING DEFINITIONS           Rating     Description   4.6 - 5.0 Exceeding Expectations.    Accomplishments are unique and superior to the standards for the position. Employee Partner has demonstrated consistent ability to go ‘above and beyond’ what is expected by creating new ideas and taking the initiative to implement, without direction, impact to areas outside immediate scope of responsibility. Has added new value to projects serves as a role model and leader for peers to use as a resource.      4.0 – 4.5 Meeting All Expectations.    Accomplishments demonstrate a sustained mastery of all facets of the position using good judgment and initiative, and producing outcomes that result in a high quality plan. Capable of additional responsibilities with minimal amount of supervision required. Could be recognized as a leader among others.      3.5-3.9 Meeting Most Expectations.    Accomplishes most objectives as outlined with acceptable quality and satisfactory outcomes. Doing a good job, and could require some additional development to achieve results of higher quality and innovation.      3.0-3.4 Meeting Minimum Expectations    Accomplishments meet some objectives with minimum acceptable quality and outcomes. Additional direction and development is required to improve performance in all areas of accountability to achieve acceptable expectations.      2.0–2.9 Below Expectations    Accomplishments meet some goals, but do not achieve the key requirements to reach minimal expectations. Additional effort is required to result in meeting expectations and improving beyond the minimum. Requires direct counseling and a detailed development plan for improvement. Failure to improve or correct the overall performance within the next review period will result in prompt termination of employment.      Below 2.0 Unsatisfactory    Has not accomplished any goals or objectives, even with close supervision. Failure to improve or correct the overall performance immediately will result in prompt termination of employment.    Page 14    TABLE 4.1  INCENTIVE PLAN  AWARD CALCULATION EXAMPLES  Example #1 – Home Office Employee Partner Level 9            ClubCorp EBITDA Budget    ClubCorpEBITDAActual   $200,000,000    $ 200,044,730            % Achievement of Budget:                100.0% equals 80% payout           Home Office Staff Base Pay    $ 80,000   Incentive Potential      25% of base      Annual Incentive Award Calculation:           EBITDA Achievement (40% of Incentive Potential)    $ 6,400   ($8,000 * 80%)           Semi-Annual Incentive Award Calculation (60% of Incentive Potential):           Incentive Period Jan-Jun with:        Blue Chip score of 3.5 (60%) and Leadership Competencies score of 3.8 (40%) to equal a combined rating of 3.60 (rounded)    $ 4,320   ($6,000 * 72%)        Incentive Period Jul-Dec with:        Blue Chip score of 3.9 (60%) and Leadership Competencies score of 4.1 (40%) to equal a combined rating of 4.0 (rounded)    $ 4,800   ($6,000 * 80%)           Annual Total Compensation Earned    $ 95,520  (Example is assuming Home Office Employee Partner is a participant in the position for entire 12 months of annual incentive period, dollar amounts given are earned as actual eligible wages and normal rounding principles are applied.)    Page 15    TABLE 4.2  INCENTIVE PLAN  AWARD CALCULATION EXAMPLES  Example #2 –Division Employee Partner                        GOP Budget      Net ID/Fee Budget      EBITDA Budget        $ 10,900,000     $ 1,100,000     $ 160,964,000               GOP Actual      Net ID/Fee Actual      EBITDA Actual        $ 12,030,000     $ 1,140,700     $ 161,000,000          % Achievement of Budget:      110.4 %     103.7 %     100 %   % Achievement Rounded to:      110.0 %     104.0 %     100 %        Division Employee Partner Base Pay              $ 80,000     Incentive Potential                25% of base          Annual Incentive Award Calculation:                        GOP Achievement (40% of Incentive Potential)              $ 9,360     ($8,000 * 117%)                   Net ID/Fee Achievement (10% of Incentive Potential)              $ 1,920     ($2,000 * 96%)                   ClubCorp EBITDA Achievement (10% of Incentive Potential)              $ 1,600     ($2,000 * 80%)                        Semi-Annual Incentive Award Calculation (40% of Incentive Potential):                        Incentive Period Jan-Jun with:                   Blue Chip score of 3.5 (60%) and Leadership Competencies score of 3.8 (40%) to equal a combined rating of 3.60 (rounded)              $ 2,880     ($4,000 * 72%)                        Incentive Period Jul-Dec with:                   Blue Chip score of 3.9 (60%) and Leadership Competencies score of 4.1 (40%) to equal a combined rating of 4.0 (rounded)              $ 3,200     ($4,000 * 80%)                        Annual Total Compensation Earned              $ 98,960    (Example is assuming Division Employee Partner is a participant in the position for entire 12 months of annual incentive period, dollar amounts given are earned as actual eligible wages and normal rounding principles are applied.)    Page 16      EX-10.25 4 dex1025.htm FOURTH AMENDMENT TO EMPLOYEE STOCK OWNERSHIP TRUST   Fourth Amendment to Employee Stock Ownership Trust   Exhibit 10.25  FOURTH AMENDMENT TO THE  CLUBCORP EMPLOYEE STOCK OWNERSHIP TRUST  This Amendment is made by ClubCorp, Inc., a Delaware corporation, formerly ClubCorp International, Inc. (“ClubCorp”).  W I T N E S S E T H:  WHEREAS, ClubCorp maintains the ClubCorp Employee Stock Ownership Plan, a restatement of the ClubCorp Stock Investment Plan (“Plan”), and the ClubCorp Employee Stock Ownership Trust (“Trust”); and  WHEREAS, ClubCorp desires to amend the Trust to change the trustee provisions to increase the discretion of the Trustees of the Trust; and  WHEREAS, the Trust may be amended by ClubCorp and the Trustee pursuant to the provisions of Article X of the Trust.  NOW, THEREFORE, effective January 1, 2006, the Trust is amended as follows:  1. Section 4.3 of the Trust is deleted in its entirety and the following is substituted in its place:  “4.3 Investment in Company Stock. Investment of Plan assets will be primarily in Company Stock. Up to 100% of Trust Fund assets attributable to the Plan (including, but not limited to cash dividends with respect to Company Stock held in the Trust Fund) may be invested in Company Stock. Assets invested in Company Stock shall remain invested in Company Stock (so long as such Company Stock is a qualifying employer security within the meaning of Section 407 of ERISA). However, ongoing investments in Securities or Other Property may be made or maintained to the extent necessary or appropriate to provide liquidity needs as otherwise required by ERISA, or to the extent Company Stock is not available for purchase. The Trustee shall not be required to diversify the Trust Fund with respect to Company Stock held under this Section 4.3. To the extent that retained cash is not needed for current expenditures or to the extent that Company Stock is not available, the Trustee, pending the use of such retained cash for current expenditures or pending the availability of Company Stock, shall invest the Trust Fund in Securities or Other Property as defined in Section 2.15 hereof. In furtherance hereof, the Trustee may, notwithstanding Section 4.2(j), borrow money from others, including loans from or guaranteed by the Company or any shareholder of the Company to finance the acquisition of Company Stock, provided that the proceeds of any such loan shall be used, within a reasonable time after such loan is made, only to purchase Company Stock or repay the loan or any prior loan, the proceeds of which were used to purchase Company Stock; and provided,    further, that notwithstanding any amendment to or termination of the Plan which causes it to cease to qualify as an employee stock ownership plan within the meaning of Section 4975(e)(7) of the Code, no shares of Company Stock acquired with the proceeds of a loan pursuant to Section 8.16 of the Plan may be subject to a put, call or other option, or buy-sell or similar arrangement (other than as described in Subsections 5.9(h) or 5.9(j) of the Plan) while such shares are held by or when distributed from this Trust Fund; and provided, further, that any such loan shall bear a reasonable rate of interest and may be secured by a collateral pledge of the Company Stock so acquired; and provided, further, that no other Trust Fund assets may be pledged as collateral by the Trustee, and no lender shall have recourse against any Trust Fund asset other than any Company Stock remaining subject to pledge; and provided, further, that any pledge of Company Stock must provide for the release of shares so pledged on a pro rata basis as principal and interest on such loan is repaid by the Trustee; and provided, further, that repayments of principal and interest on any loans shall be repaid by the Trustee only from (i) Employer Contributions in cash to the Trust, (ii) cash dividends, if any, received on any Company Stock unallocated to the Accounts of Participants, (iii) earnings attributable to such Company Stock, and (iv) Company Stock, given as collateral for a prior loan which is repaid with the proceeds of the current loan, or acquired with the proceeds of the current loan; and for the sum so borrowed or advanced, the Trustee may issue its promissory note as Trustee and secure the repayment thereof by creating a lien upon any assets of the Trust Fund.”  2. Section 4.7 of the Trust is deleted in its entirety and the following is substituted in its place:  “4.7 Voting of Company Stock, Proxies, etc. The Trustee shall vote shares of Company Stock, subject to the directions of the Participants in certain cases, as provided in the Plan. The Trustee shall maintain a complete record of the manner in which shares of stock (including Company Stock) held as part of the Trust Fund are voted, unless the instrument appointing an Investment Manager with respect to such shares delegates to the Investment Manager the responsibility for so recording such voting, whether such shares are voted by the Trustee in the exercise of its investment direction with respect to such shares or upon the direction of a Participant or an Investment Manager. If the Trustee votes such shares of stock (including Company Stock) in its discretion, it shall also maintain a record of the reasons for such vote.”  3. Section 4.9 of the Trust is deleted in its entirety and the following is substituted in its place:  “4.9 Sale of Shares. The Trustee has the right to require the Company (and the Company is obligated) to buy shares of Company Stock from the Trust; provided, however, that the rights of the Trustee to require the Company to purchase any shares of Company Stock, and the obligations of the Company to purchase any such shares    2    of Company Stock, are subject to any restrictions on the purchase of shares of Company Stock which may be imposed by applicable laws of the State of Texas or the United States, and may only be exercised when needed by the Trustee (i) to fund the distribution in cash of a Participant’s interest in the Plan which is held in Company Stock; (ii) to diversify a Participant’s Account in accordance with Code Section 401(a)(28); (iii) to pay expenses incurred by the Trust; or (iv) in the event Company Stock becomes an investment prohibited by law. The Trustee shall exercise its right to sell Company Stock to the Company described herein by first giving the Company thirty (30) days’ written notice.  The per share purchase price of any shares of Company Stock repurchased by the Company pursuant to this Section shall be at a price which is at least equal to a value that constitutes “adequate consideration” within the meaning of ERISA Section 3(18), and no commission shall be charged. This repurchase price of any Company Stock shall be paid in cash and shall not be less than current fair market value.  Notwithstanding any other provision hereof, this Section becomes inoperative if the Company Stock becomes readily tradable on an established exchange, so long as the Company causes the Company Stock as held by the Trust to be registered and/or takes other steps to permit stock held by the Trust to become readily tradable.”  4. Section 6.7(c) of the Trust is deleted in its entirety and the following is substituted in its place:  “(c) The indemnity will cover all actions taken at the Trustee’s discretion, Trustee’s actions taken at the direction of another party pursuant to the terms of the Plan or Trust, and Trustee’s inaction due to lack of directions that another party is required to provide Trustee pursuant to the terms of the Plan or Trust, including losses resulting from Trustee’s negligence, fiduciary breach, or other fault, provided that the Trustee acted in good faith and did not engage in fraud or willful or intentional misconduct. Any such indemnity will be limited to what is legally permissible.”  5. Article VII of the Trust is deleted in its entirety and the following is substituted in its place:  “ARTICLE VII  ACCOUNTS AND RECORDS  The Trustee shall cause to be maintained true, accurate and detailed accounts of all investments, receipts, disbursements and other transactions hereunder. All accounts, books, and records relating thereto shall be open to inspection at all reasonable times and may be audited from time to time by any person designated by the Plan Administrator. Within ninety (90) days after the close of the fiscal year of    3    the Trust Fund, within ninety (90) days after the removal or resignation of the Trustee, and from time to time as the Plan Administrator may direct, the Trustee shall file a written account with the Plan Administrator which shall show: (i) the assets of the Trust Fund, as of the end of such period, and the cost and current value thereof as defined in ERISA Section 3(26); and (ii) all investments, receipts, disbursements, and other transactions effected by it during such fiscal year or other period for which such accounting is filed. Notwithstanding anything to the contrary contained herein, Company Stock shall be valued as of June 30 and December 31 (or such other valuation date as determined by the Trustee pursuant to Plan Section 6.08) by an independent appraiser selected and retained by the Trustee. In the event Company Stock becomes readily tradable on a generally recognized market, the foregoing sentence shall not apply. The Trustee shall be responsible for making a good faith determination of the fair market value of Company Stock whenever such a determination is required by ERISA. If, at the time such written account is to be filed, the Trust Fund contains assets which have no readily ascertainable fair market value (other than Company Stock), the Trustee shall be responsible for valuing only such of those assets as were acquired by the Trustee in its discretion. Any such assets not acquired by the Trustee in its discretion shall be valued by the Plan Administrator. The Plan Administrator may approve such accounting by written notice of approval delivered to the Trustee or by failure to express objection to such accounting in writing delivered to the Trustee within ninety (90) days from the date upon which the accounting is delivered to the Plan Administrator. Upon the expiration of ninety (90) days from the date of filing such account with the Plan Administrator or upon earlier specific approval thereof by the Plan Administrator, the Trustee, as between each Employer, the Plan Administrator, and the Trustee, shall be forever released and discharged from all liability as to all items and matters included in such accounting as if settled by the decree of a court of competent jurisdiction, except with respect to any such action or transaction to which the Plan Administrator shall within such ninety (90) day period, file written objections with the Trustee. The liability of Trustee to persons other than an Employer or the Plan Administrator shall be limited to actions under ERISA brought within the period permitted by law for the bringing of such action. Nothing herein contained, however, shall be deemed to preclude the Trustee of its right to have its accounts judicially settled by a court of competent jurisdiction.”  6. Section 9.2 of the Trust is deleted in its entirety and the following is substituted in its place:  “9.2 Appointment of Successor Trustee. The Company may appoint successor or additional Trustees and may remove Trustee(s) at any time by providing written notice to any removed Trustee(s). A new Trustee(s) must acknowledge its appointment as Trustee by a written instrument. In the case of a Trustee that is removed, the Company may appoint a successor trustee if the Company deems that such appointment is necessary. The Company may also appoint a successor trustee or additional trustees to fill the vacancy occurring as a result of the resignation of the Trustee. A successor Trustee must also acknowledge its appointment as Trustee by a    4    written instrument. Any new Trustees or successor Trustees shall have all of the rights, powers, privileges, liabilities, and duties of a Trustee set forth in this Trust Agreement.”  IN WITNESS WHEREOF, ClubCorp and the Trustees have caused this instrument to be executed in multiple counterparts.               CLUBCORP, INC.       Date: March 23, 2006    By:    /s/ Tom Henslee      Its:    EVP, Secretary and General Counsel        TRUSTEES:      Date: March 23, 2006    /s/ Murray S. Siegel      Murray S. Siegel      Date: March 23, 2006    /s/ Jack Lupton      Jack Lupton      Date: March 23, 2006    /s/ Dave Woodyard      Dave Woodyard      Date: March 23, 2006    /s/ Mary Cowser      Mary Cowser    5      EX-10.26 5 dex1026.htm RESTATED CLUBCORP, INC. OMNIBUS STOCK PLAN   Restated ClubCorp, Inc. Omnibus Stock Plan   Exhibit 10.26  CLUBCORP, INC.  OMNIBUS STOCK PLAN  (Restated effective as of January 1, 2005)    TABLE OF CONTENTS            SECTION 1. DEFINITIONS    1  SECTION 2. STOCK AND MAXIMUM NUMBER OF SHARES SUBJECT TO PLAN    6            2.1    Maximum Number of Shares    6            2.2    Individual Limitation on Maximum Shares.    6            2.3    Limitation of Shares    6            2.4    Description of Shares    7  SECTION 3. ADMINISTRATION OF THE PLAN    7            3.1    Committees    7            3.2    Duration, Removal, Etc.    8            3.3    Meetings and Actions of Committees    8            3.4    Committee Powers    8            3.5    Disinterested Committee Powers    9  SECTION 4. ELIGIBILITY AND PARTICIPATION    10            4.1    Eligible Individuals    10            4.2    Grant of Awards    10            4.3    Agreements    10            4.4    No Right to Award    10  SECTION 5. ADJUSTMENT PROVISIONS    10            5.1    Adjustment of Awards and Authorized Stock    10            5.2    Change in Control    11            5.3    Golden Parachute Limitation    11  SECTION 6. MISCELLANEOUS PROVISIONS    12            6.1    Term of Award                6.2    Transferability of Awards    12            6.3    Cash Out Feature    13            6.4    Forfeiture and Restrictions on Transfer    13            6.5    Conditions to Delivery of Stock    16            6.6    Payment with Sale Proceeds    17            6.7    Certain Directors and Officers    17            6.8    Rights as a Shareholder    17            6.9    Furnish Information    18            6.10    Obligation to Exercise    18            6.11    Adjustments to Awards    18            6.12    Remedies    18            6.13    Information Confidential    18            6.14    Consideration    18            6.15    Acceleration of Vesting Upon Change of Control    19  SECTION 7. DURATION AND AMENDMENT OF PLAN    19            7.1    Duration    19            7.2    Amendment    19  SECTION 8. GENERAL    19            8.1    Application of Funds    19            8.2    Right of the Corporation and Affiliates to Terminate Employment    19            8.3    No Liability for Good Faith Determinations    19    i                      8.4    Other Benefits    20            8.5    Exclusion From Pension and Profit-Sharing Compensation.    20            8.6    Agreement Requirements    20            8.7    Beneficiary Designation.    20            8.8    Execution of Receipts and Releases    21            8.9    Unfunded Plan    21            8.10    No Guarantee of Interests    21            8.11    Payment of Expenses    21            8.12    Corporation Records    21            8.13    Information    21            8.14    No Liability of Corporation    21            8.15    Corporation Action    22            8.16    Arbitration    22            8.17    Severability    22            8.18    Notices    22            8.19    Successors    23            8.20    Headings    23            8.21    Governing Law    23            8.22    Word Usage    23    ii    CLUBCORP, INC.  OMNIBUS STOCK PLAN  SCOPE AND PURPOSE OF RESTATED PLAN  The Corporation adopted and established the Plan effective on February 10, 1998 and restated the Plan in its entirety effective January 1, 2001. Section 7.2 of the Plan provides that the Board of Directors of the Company may amend the Plan at any time. The Plan is hereby amended and restated effective as of January 1, 2005.  ClubCorp, Inc., a Texas corporation, adopted the ClubCorp, Inc. Omnibus Stock Plan to provide for the granting of various forms of stock based compensation including:  (a) Options to certain key employees and other persons;  (b) Phantom Shares to certain key employees and other persons;  (c) Stock Appreciation Rights to certain key employees and other persons; and  (d) Restricted Stock to certain key employees and other persons.  The purpose of the Plan is to provide an incentive for key employees of the Corporation or its Affiliates so that they will apply their best efforts for the benefit of the Corporation, to encourage them to remain in the service of the Corporation and its Affiliates; to extend to them the opportunity to acquire a proprietary interest in the Corporation; and to aid the Corporation and its Affiliates in attracting able persons to enter the service of the Corporation and its Affiliates. The Plan is not intended to be a plan subject to the Employee Retirement Income Security Act of 1974, as amended and shall be construed accordingly.  SECTION 1. DEFINITIONS  1.1 “Act” means the Securities Exchange Act of 1934, as amended or any similar or superseding statute or statutes.  1.2 “Affiliates” means any entity that is, directly or indirectly, 50% or more owned by the Corporation.  1.3 “Agreement” means the written agreement between the Corporation and a Holder evidencing the terms, conditions, and limitations of the Award granted to that Holder.    1    1.4 “Award” means the grant of any form of Option, Stock Appreciation Right, Phantom Share or Restricted Stock share under the Plan, whether granted individually, in combination, or in tandem, to a Holder pursuant to the terms, conditions, and limitations that the Committee may establish in order to fulfill the objectives of the Plan.  1.5 “Board of Directors” means the board of directors of the Corporation.  1.6 “Cause” shall mean any occurrence of the following: (a) Holder’s engagement in any personal misconduct involving willful dishonesty, illegality, or moral turpitude that is materially detrimental to the business interests, reputation or goodwill of the Corporation; (b) Holder’s engagement in any act involving willful dishonesty, disloyalty, or infidelity against the Corporation; (c) Holder’s willful and continued breach or failure to perform under any of the material terms and covenants of this Agreement; or (d) Holder’s willful and continued material breach or failure to perform under any policy established by the Corporation with respect to the operation of the Corporation’s business and affairs, or the conduct of the Corporation’s employees.  1.7 “Change in Control” means the event that is deemed to have occurred if:  (a) a dissolution or liquidation of the Corporation;  (b) a merger or consolidation (other than a merger effecting a re-incorporation of the Corporation in another state or any other merger or a consolidation in which the shareholders of the surviving corporation and their proportionate interests therein immediately after the merger or consolidation are substantially identical to the shareholders of the Corporation and their proportionate interests therein immediately prior to the merger or consolidation) in which the Corporation is not the surviving corporation (or survives only as a subsidiary of another corporation in a transaction in which the shareholders of the parent of the Corporation and their proportionate interests therein immediately after the transaction are not substantially identical to the shareholders of the Corporation and their proportionate interests therein immediately prior to the transaction; provided, however, that the Board of Directors may at any time prior to such a merger or consolidation provide by resolution that the foregoing provisions of this parenthetical shall not apply if a majority of the Board of Directors of such parent immediately after the transaction consists of individuals who constituted a majority of the Board of Directors immediately prior to the transaction); or  (c) transaction in which any person (other than a shareholder of the Corporation on the date of the Holder’s Agreement) becomes the owner of fifty percent (50%) or more of the total combined voting power of all classes of stock of the Corporation (provided, however, that the Board of Directors may at any time prior to such transaction provide by resolution that this Subsection shall not apply if such acquiring person is a corporation and a majority of the Board of Directors of the acquiring corporation immediately after the transaction consists of individuals who constituted a majority of the Board of Directors immediately prior to the acquisition of such fifty percent (50%) or more total combined voting power).    2    1.8 “Change in Control Period” shall mean the period beginning ninety (90) days prior to and ending two (2) years following a Change in Control  1.9 “Code” means the Internal Revenue Code of 1986, as amended.  1.10 “Committee” means the committee appointed pursuant to Section 3 of the Plan by the Board of Directors to administer this Plan.  1.11 “Corporation” means ClubCorp, Inc. and any successor corporation and all Affiliates.  1.12 “Disability” or “Disabled” means a total and permanent disability as defined in the Corporation’s current long term disability plan, or if the Committee has no long term disability plan in effect at the time of the Holder’s disability, as determined by the Committee in its sole discretion.  1.13 “Disinterested Committee” means the committee appointed pursuant to Section 3 of the Plan by the Board of Directors to administer the Plan.  1.14 “Dividend” means the aggregate amount declared as a dividend on Stock, as determined in the sole discretion of the Board of Directors.  1.15 “Eligible Individuals” means (a) those employees designated by the Committee as key employees of the Corporation or any of its Affiliates who have signed an employment agreement with the Corporation or an Affiliate prior to the date an Option is granted or within one hundred and twenty days of the date an Option is granted, and (b) those members of the Board of Directors designated by the Disinterested Committee.  1.16 “Exercise Notice” means the written notice of exercise delivered to the Corporation during the term of the Award, which shall (a) state the number of shares of Stock with respect to which the Award is being exercised, (b) be signed by the Holder of the Award or, if the Holder is dead or becomes affected by a Disability, by the person authorized to exercise the Award pursuant to Section 8.7, (c) be accompanied by the Exercise Price (if any) for all shares of Stock for which the Award is being exercised, and (d) include such other information, instruments, and documents as may be required to satisfy any other condition of exercise contained in the Agreement.  1.17 “Exercise Price” means the price at which an Award can be exercised as specified in the Agreement covering such Award.  1.18 “Fair Market Value” means, for a particular day:  (a) If shares of Stock of the same class are listed or admitted to unlisted trading privileges on any national or regional securities exchange or sales prices for such shares in the over-the-counter market are reported by the National Association of Securities Dealers, Inc. Automated Quotations, Inc. (“NASDAQ”) National Market System at the date of determining the Fair Market Value, the     3     mean between the highest and lowest quoted selling prices on the date in question, or if there were no sales on the date in question, the weighted average of the means between the highest and lowest sales on the nearest date before and the nearest date after the date in question; or  (b) If shares of Stock of the same class shall not be listed or admitted to unlisted trading privileges as provided in Subsection 1.18(a) and sales prices for such shares shall not be reported by the NASDAQ National Market System as provided in Subsection 1.18(a), and bid and asked prices therefor in the over-the-counter market shall be reported by NASDAQ (or, if not so reported, by the National Quotation Bureau Incorporated) at the date of determining the Fair Market Value, the mean of the closing bid and asked prices on the date in question, or if none, by taking a weighted average of the means between the bid and asked prices on the nearest trading date before and the nearest trading date after the date in question, if both such dates are within a reasonable period; and  (c) If shares of Stock of the same class shall not be listed or admitted to unlisted trading privileges as provided in Subsection 1.18(a) and sales prices or bid and asked prices for such shares shall not be reported by NASDAQ (or the National Quotation Bureau Incorporated) as provided in Subsection 1.18(a) or Subsection 1.18(b) at the date of determining the Fair Market Value, or in the opinion of the Board of Directors, there is insufficient trading to establish fair market value, the value determined in good faith by the Board of Directors and confirmed by an independent financial advisory firm.  1.19 “Hardship” shall mean the Committee’s written determination, delivered to the Eligible Individual of reference, stating that the Committee has determined that such Eligible Individual has an immediate and heavy financial need which such Eligible Individual cannot meet through any other sources of income such as insurance, reasonable liquidation of assets, borrowing or similar sources and resulting from: (i) unreimbursed substantial medical expenses for the Eligible Individual or a family member; (ii) purchase (excluding mortgage payments) of the Eligible Individual’s primary residence; (iii) payments necessary to prevent eviction of the Eligible Individual from his primary residence, or foreclosure of his primary residence; and (iv) such other, similar, circumstances which the Committee, in its sole discretion, reasonably determine pose a substantial risk to the basic health, shelter and safety needs of the Eligible Individual or his family members.  1.20 “Holder” means an Eligible Individual to whom an outstanding Award has been granted.  1.21 “New Option” shall mean an Option granted on or after July 1, 2000.  1.22 “Option” means a stock option that does not satisfy the requirements of Code Section 422. All references herein to Options shall be references to both New Options and Prior Options, collectively, except that where a reference is intended to be exclusively to a New Option, or a Prior Option, reference will be made to the specific type of Option.  1.23 “Outside Director” has the meaning given to it in Code Section 162(m) and the regulations thereunder.    4    1.24 “Phantom Share(s)” means the share(s) granted to a Holder which entitle the Holder to receive payment of an amount equal to the Fair Market Value of a share of Stock on the date of exercise.  1.25 “Plan” means the ClubCorp, Inc. Omnibus Stock Plan, as amended from time to time.  1.26 “Prior Option” shall mean an Option granted prior to July 1, 2000.  1.27 “Restricted Stock” means Stock granted to Eligible Individuals pursuant to the Plan which is subject to certain restrictions as to its transferability.  1.28 “Rule 16b-3” means Rule 16b-3 under Section 16(b) of the Act as adopted in Act Release No. 34-29131 (April 26, 1991), and amended in Act Release No. 37260 (May 31, 1996), or any successor rule, as amended from time to time.  1.29 “Securities Act” means the Securities Act of 1933 and the rules and regulations promulgated thereunder, or any successor law, as it may be amended from time to time.  1.30 “Stock” means the common stock, $.01 par value per share, of ClubCorp, Inc.  1.31 “Stock Appreciation Right” means the right to receive payment of an amount equal to the excess of the Fair Market Value of a share of Stock (as determined on the date of exercise) over, as appropriate, the Exercise Price of a related Option or the Fair Market Value of the Stock on the date of grant of the Stock Appreciation Right.  1.32 “Termination” means a Holder’s termination of employment with the Corporation for any reason.  1.33 “Vesting Acceleration Termination” means, a Holder’s Termination from employment with the Corporation or an Affiliate that has occurred within the Change in Control Period and said Termination was due to:  (a) the resignation of such Holder which was caused by and within thirty (30) days of any of the following: (i) without the express written consent of such Holder, the Holder is assigned to duties which are materially inconsistent with or result in a material diminution of the Holder’s position, duties, and status within the Corporation or any Affiliate at the time of the Change in Control; or (ii) the base salary of the Holder is reduced; or  (b) involuntary Termination for a reason other than Cause.  1.34 “Competitor” shall mean any person or entity that competes with the Corporation in the private club, athletic club, racquet club, golf or country club including public fee golf courses, timeshare or resort businesses, or any business that the Corporation is engaged in as of the Holder’s last day of employment.”    5    SECTION 2. STOCK AND MAXIMUM NUMBER OF SHARES SUBJECT TO PLAN  2.1 Maximum Number of Shares. Subject to the provisions of Section 2.2, 5, and 6.11, the aggregate number of shares of Stock that may be issued or transferred pursuant to Awards under the Plan shall be seven million six hundred thirty eight thousand eight hundred sixty two (7,638,862) shares.  2.2 Individual Limitation on Maximum Shares. The aggregate number of shares of Stock subject to an Award that may be issued or transferred to any single Eligible Individual in a calendar year under the Plan shall be nine hundred twenty five thousand (925,000) shares.  2.3 Limitation of Shares. For purposes of the limitations specified in Sections 2.1 and 2.2, the following principles shall apply:  (a) the following shall count against and decrease the number of shares of Stock that may be issued for purposes of Sections 2.1 and 2.2: (i) shares of Stock subject to outstanding Options (granted under this Plan), shares of Stock subject to outstanding Phantom Shares (based on a good faith estimate by the Corporation or the Committee of the maximum number of shares for which the Phantom Shares may be settled (assuming payment in full in shares of Stock)), and shares of Stock subject to outstanding Stock Appreciation Rights granted independent of Options, (based on a good faith estimate by the Corporation or the Committee of the maximum number of shares for which the Stock Appreciation Right may be settled (assuming payment in full in shares of Stock)), and (ii) in the case of Options granted in tandem with Stock Appreciation Rights, the greater of the number of shares of Stock that would be counted if one or the other alone was outstanding (determined as described in clause (i) above);  (b) the following shall be added back to the number of shares of Stock that may be issued for purposes of Section 2.1 only: (i) shares of Stock with respect to which Options (granted under this Plan), Phantom Shares, and Stock Appreciation Rights granted independent of Options, expire, are canceled, or otherwise terminate without being exercised, converted, or vested, as applicable, and (ii) in the case of Options granted in tandem with Stock Appreciation Rights, shares of Stock as to which an Option has been surrendered in connection with the exercise of a related (“tandem”) Stock Appreciation Right, to the extent the number surrendered exceeds the number issued upon exercise of the Stock Appreciation Right;  (c) shares of Stock subject to Stock Appreciation Rights (granted independent of Options) or Phantom Shares (calculated as provided in clause (a) above) that are exercised and paid in cash shall be added back to the number of shares of Stock that may be issued for purposes of Section 2.1 only;  (d) shares of Stock that are transferred by a Holder of an Award (or withheld by the Corporation) as (i) full or partial payment to the Corporation of the purchase price of shares of Stock subject to an Option or (ii) the Corporation’s or any Affiliate’s tax withholding obligations shall not be added back to the number of shares of Stock that may be issued for purposes of Sections 2.1 and 2.2 and shall not again be subject to Awards; and    6    (e) if the number of shares of Stock counted against the number of shares that may be issued for purposes of Section 2.1 and 2.2 is based upon an estimate made by the Corporation or the Committee as provided in clause (a) above and the actual number of shares of Stock issued pursuant to the applicable Award is greater or less than the estimated number, then, upon such issuance, the number of shares of Stock that may be issued pursuant to Section 2.1 and 2.2 shall be further reduced by the excess issuance or increased by the shortfall, as applicable.  Notwithstanding the provisions of this Section 2.3, no Stock shall be treated as issuable under the Plan to Eligible Individuals subject to Section 16 of the Act if otherwise prohibited from issuance under Rule 16b-3.  2.4 Description of Shares. The shares of Stock to be delivered under the Plan shall be made available from: (a) authorized but unissued shares of Stock; (b) Stock held in the treasury of the Corporation; or (c) previously issued shares of Stock reacquired by the Corporation, including shares purchased on the open market, in each situation as the Board of Directors or the Committee may determine from time to time in its sole discretion.  SECTION 3. ADMINISTRATION OF THE PLAN  3.1 Committees. The Committee shall be appointed by the Board of Directors and shall administer the Plan with respect to all Eligible Individuals other than those who are members of the Board of Directors. The Disinterested Committee shall be appointed by the Board of Directors and shall be composed of persons who shall not be Eligible Individuals. The Disinterested Committee shall administer the Plan with respect to all members of the Board of Directors who participate in the Plan, if any. Neither Committee shall have the power to appoint members of either committees or to terminate or amend the Plan. Except for references in Sections 3 and 4, and unless the context otherwise requires, references herein to the Committee shall refer to the Disinterested Committee as administrator of the Plan for members of the Board of Directors who are Eligible Individuals, if any. In the event that the Stock is registered under Section 12 of the Act, all members of the Committee shall be Outside Directors. The number of persons that shall constitute the Committee and the Disinterested Committee shall be determined from time to time by a majority of all the members of the Board of Directors and, unless that majority of the Board of Directors determines otherwise or Rule 16b-3 is amended to require otherwise, shall be no less than two persons. To the extent that Rule 16b-3 promulgated under the Act requires a system of administration that is different from this Section 3.1, this Section 3.1 shall automatically be deemed amended to the extent necessary to cause it to be in compliance with Rule 16b-3.    7    3.2 Duration, Removal, Etc. The members of the Committee and the Disinterested Committee shall serve at the discretion of the Board of Directors, which shall have the power, at any time and from time to time, to remove members from or add members to the Committee or the Disinterested Committee. Removal from the Committee or the Disinterested Committee may be with or without cause. Any individual serving as a member of the Committee or the Disinterested Committee shall have the right to resign from membership in the Committee or the Disinterested Committee by at least three days’ written notice to the Board of Directors. The Board of Directors, and not the remaining members of the Committee or the Disinterested Committee, shall have the power and authority to fill all vacancies on the Committee or the Disinterested Committee. The Board of Directors shall, within sixty (60) days, fill any vacancy that causes the number of members of the Committee or the Disinterested Committee to be below two or any other number that Rule 16b-3 or Code Section 162(m) may require from time to time.  3.3 Meetings and Actions of Committees. The Board of Directors shall designate which of the Committee and Disinterested Committee members shall be the chairman of the respective Committees. If the Board of Directors fails to designate a chairman for each of the Committees, the members of the Committee and the members of the Disinterested Committee shall elect one of its members as chairman of the respective Committees, who shall act as chairman until he ceases to be a member of the Committee or Disinterested Committee or until the Board of Directors elects a new chairman. The Committee and the Disinterested Committee shall hold their meetings at those times and places as the chairman of the respective Committees may determine. At all meetings of the Committee or the Disinterested Committee, a quorum for the transaction of business shall be required and a quorum shall be deemed present if at least a majority of the members of the Committee or the Disinterested Committee are present. At any meeting of the Committee or the Disinterested Committee, each member shall have one vote. All decisions and determinations of the Committee and the Disinterested Committee shall be made by the majority vote or majority decision of all of its members present at a meeting at which a quorum is present; provided, however, that any decision or determination reduced to writing and signed by all of the members of the Committee and the Disinterested Committee shall be as fully effective as if it had been made at a meeting that was duly called and held. The Committee and the Disinterested Committee may make any rules and regulations for the conduct of their business that are not inconsistent with the provisions of the Plan, the Articles or Certificate of Incorporation of the Corporation, the by-laws of the Corporation, and Rule 16b-3 so long as it is applicable, as the Committee or the Disinterested Committee may deem advisable.  3.4 Committee Powers. Subject to the express provisions of the Plan and Rule 16b-3, the Committee, with respect to all Eligible Individuals and Holders who are not Board of Director members, shall have the authority, in its sole and absolute discretion, to: (a) adopt and rescind administrative and interpretive rules and regulations relating to the Plan; (b) determine the Eligible Individuals to whom, and the time or times at which, Awards shall be granted; (c) determine the amount of cash and the number of shares of Stock, Stock Appreciation Rights, Phantom Shares or shares of Restricted Stock, or any combination thereof, that shall be the subject of each Award; (d) determine the terms and provisions of each Award (which need not be identical), including provisions defining or otherwise relating to (i) the term and the period or periods and extent of     8     exercisability of the Awards, (ii) the extent to which the transferability of shares of Stock issued or transferred pursuant to any Award is restricted, (iii) the effect of Holder’s Termination on the Agreement, and (iv) the effect of approved leaves of absence (consistent with applicable law); (e) accelerate the exercisability of any Award that has been granted; (f) construe the respective Awards and the Plan; (g) make determinations of the Fair Market Value of the Stock pursuant to the Plan; (h) delegate its duties under the Plan to such agents as it may appoint from time to time, provided that the Committee may not delegate its duties with respect to making Awards to, or otherwise with respect to Awards granted to Eligible Individuals who are subject to Section 16(b) of the Act or Section 162(m) of the Code; and (i) make all other determinations, perform all other acts, and exercise all other powers and authority necessary or advisable for administering the Plan, including the delegation of those ministerial acts and responsibilities as the Committee deems appropriate. Subject to Rule 16b-3 and Code Section 162(m), the Committee may correct any defect, supply any omission, or reconcile any inconsistency in the Plan or in any Award in the manner and to the extent it deems necessary or desirable to carry the Plan into effect, and the Committee shall be the sole and final judge of that necessity or desirability. The determinations of the Committee on the matters referred to in this Section 3.4 shall be final and conclusive.  3.5 Disinterested Committee Powers. Subject to the express provisions of the Plan and Rule 16b-3, the Disinterested Committee, with respect to all Eligible Individuals and Holders who are Board of Director members, shall have the authority, in its sole and absolute discretion, to: (a) adopt and rescind administrative and interpretive rules and regulations relating to the Plan; (b) determine the Eligible Individuals to whom, and the time or times at which, Awards shall be granted; (c) determine the amount of cash and the number of shares of Stock, Stock Appreciation Rights, Phantom Shares or shares of Restricted Stock, or any combination thereof, that shall be the subject of each Award; (d) determine the terms and provisions of each Award (which need not be identical), including provisions defining or otherwise relating to (i) the term and the period or periods and extent of exercisability of the Awards, (ii) the extent to which the transferability of shares of Stock issued or transferred pursuant to any Award is restricted, (iii) the effect of Holder’s Termination on the Agreement, and (iv) the effect of approved leaves of absence (consistent with applicable law) (e) accelerate the exercisability of any Award that has been granted; (f) construe the respective Awards and the Plan; (g) make determinations of the Fair Market Value of the Stock pursuant to the Plan; (h) delegate its duties under the Plan to such agents as it may appoint from time to time, provided that the Disinterested Committee may not delegate its duties with respect to making Awards to, or otherwise with respect to Awards granted to Eligible Individuals who are subject to Section 16(b) of the Act or Section 162(m) of the Code; and (i) make all other determinations, perform all other acts, and exercise all other powers and authority necessary or advisable for administering the Plan, including the delegation of those ministerial acts and responsibilities as the Disinterested Committee deems appropriate. Subject to Rule 16b-3 and Code Section 162(m), the Disinterested Committee may correct any defect, supply any omission, or reconcile any inconsistency in the Plan or in any Award in the manner and to the extent it deems necessary or desirable to carry the Plan into effect, and the Disinterested Committee shall be the sole and final judge of that necessity or desirability. The determinations of the Disinterested Committee on the matters referred to in this Section 3.5 shall be final and conclusive.    9    SECTION 4. ELIGIBILITY AND PARTICIPATION  4.1 Eligible Individuals. Awards may be granted pursuant to this Plan only to persons who are Eligible Individuals at the time of the grant thereof and shall be made in whatever form the Committee, or the Disinterested Committee, as applicable, in its sole discretion may determine including Options, Phantom Shares, Stock Appreciation Rights and Restricted Stock.  4.2 Grant of Awards. Subject to the express provisions of the Plan, the Chief Executive Officer (CEO) and the Chief Operations Officer of Domestic Operations (COO-DO) shall determine which Eligible Individuals shall be granted Awards during the period from the effective date of the Plan through June 30, 1998. After June 30, 1998, the Committee shall determine which Eligible Individuals, other than Board of Director members, shall be granted Awards from time to time. The Disinterested Committee shall determine which members of the Board of Directors shall be Eligible Individuals and granted Awards from time to time. The Board of Directors shall also have the power to grant Awards, subject to the requirements of Rule 16b-3. References to the Committee throughout the remainder of this Section 4.2 and Section 4.3 shall mean the CEO, COO-DO, Board of Directors, the Committee or the Disinterested Committee, as appropriate. In making grants, the Committee and Disinterested Committee shall take into consideration the contribution the potential Holder has made or may make to the success of the Corporation or its Affiliates and such other considerations as the Board of Directors may from time to time specify. The Committee and Disinterested Committee shall also determine the number of shares subject to each of the Awards and shall authorize and cause the Corporation to grant Awards in accordance with those determinations. All grants to Eligible Individuals who are “covered employees” under Code Section 162(m) shall be subject to shareholder approval sufficient to satisfy the requirements of Code Section 162(m). Notwithstanding any provision to the contrary, an Award shall be void if the Holder is not an Eligible Individual.  4.3 Agreements. Each Award granted under the Plan shall be evidenced by an Agreement that is executed by the Corporation and the Eligible Individual to whom the Award is granted and shall incorporate the terms and conditions of such Award as the Committee shall deem necessary or desirable. More than one Award may be granted under the Plan to the same Eligible Individual and be outstanding concurrently.  4.4 No Right to Award. The adoption of the Plan shall not be deemed to give any person a right to be granted an Award.  SECTION 5. ADJUSTMENT PROVISIONS  5.1 Adjustment of Awards and Authorized Stock. The terms of an Award and the number of shares of Stock authorized pursuant to Section 2.1 shall be subject to adjustment from time to time, in accordance with the following provisions:    10    (a) If at any time, or from time to time, the Corporation shall subdivide as a whole (by reclassification, by a Stock split, by the issuance of a distribution on Stock payable in Stock, or otherwise) the number of shares of Stock then outstanding into a greater number of shares of Stock, then (i) the maximum number of shares of Stock available for the Plan as provided in Section 2.1 shall be increased proportionately, and the kind of shares or other securities available for the Plan shall be appropriately adjusted, (ii) the number of shares of Stock (or other kind of shares or securities) that may be acquired under any Award shall be increased proportionately, and (iii) the price (including Exercise Price) for each share of Stock (or other kind of shares or securities) subject to then outstanding Awards shall be reduced proportionately, without changing the aggregate purchase price or value as to which outstanding Awards remain exercisable or subject to restrictions.  (b) If at any time, or from time to time, the Corporation shall consolidate as whole (by reclassification, reverse Stock split, or otherwise) the number of shares of Stock then outstanding into a lesser number of shares of Stock, then (i) the maximum number of shares of Stock available for the Plan as provided in Section 2.1 shall be decreased proportionately, and the kind of shares or other securities available for the Plan shall be appropriately adjusted, (ii) the number of shares of Stock (or other kind of shares or securities) that may be acquired under any Award shall be decreased proportionately, and (iii) the price (including Exercise Price) for each share of Stock (or other kind of shares or securities) subject to then outstanding Awards shall be increased proportionately, without changing the aggregate purchase price or value as to which outstanding Awards remain exercisable or subject to restrictions.  (c) Whenever the number of shares of Stock subject to outstanding Awards and the price for each share of Stock subject to outstanding Awards are required to be adjusted as provided in this Subsection 5.1(c), the Committee shall promptly prepare a notice setting forth, in reasonable detail, the event requiring adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the change in price and the number of shares of Stock, other securities, cash, or property purchasable subject to each Award after giving effect to the adjustments. The Committee shall promptly give each Holder (or his transferee) such a notice.  (d) Adjustments under Subsections 5.1(a) and (b) shall be made by the Committee, and its determination as to what adjustments shall be made and the extent thereof shall be final, binding, and conclusive. No fractional interest shall be issued under the Plan on account of any such adjustments.  5.2 Change in Control. As of the effective date of a Change in Control, the Board of Directors shall change the number and kind of shares of Stock subject to any Award (including substitution of shares of another corporation), and the Exercise Price thereof, in the manner it deems appropriate as determined in its sole discretion.  5.3 Golden Parachute Limitation. In the event that Code Section 280G applies to any Award and the aggregate present value of the benefits to a Holder under the Plan, and any other plan, program, or arrangement maintained by the Corporation constitutes an “excess parachute payment” (within the meaning of Code Section 280G(b)(1)) and the excise tax on such payment would cause the net parachute payments (after taking into account federal, state and local income and excise     11     taxes) to which the Holder otherwise would be entitled to be less than what the Holder would have netted (after taking into account federal, state and local income taxes) had the present value of his total parachute payments equaled $1.00 less than three times his “base amount” (within the meaning of Code Section 280G(b)(3)(A)), the Holder’s total “parachute payments” (within the meaning of Code Section 280G(b)(2)(A)) shall be reduced (by the minimum possible amount) so that their aggregate present value equals $1.00 less than three times such base amount. For purposes of this calculation, it shall be assumed that the Holder’s tax rate will be the maximum marginal federal, state and local income tax rate on earned income with such maximum federal rate to be computed with regard to Code Section 1(g), if applicable. In the event that the Holder and the Corporation are unable to agree as to the amount of the reduction described above, if any, the Corporation shall select a law firm or accounting firm from among those regularly consulted by the Corporation regarding federal income tax or employee benefit matters and such law firm or accounting firm shall determine the amount of such reduction and such determination shall be final and binding upon the Holder and the Corporation.  SECTION 6. MISCELLANEOUS PROVISIONS  6.1 Term of Award. The provisions of this Section shall apply to the extent a Holder’s Agreement does not expressly provide otherwise. If the Holder’s employment with the Corporation is terminated for Cause, the Option shall terminate immediately upon the Holder’s Involuntary Termination for Cause and cease to be payable or exercisable. If the Holder resigns or voluntarily leaves his or her employment, the Holder shall have the right for thirty (30) days following the date of his or her resignation or voluntary separation to exercise such Option which he or she has been granted, to the extent such Option is exercisable on the date of his or her Termination. If the Holder ceases to be an Eligible Individual by reason of: (a) Disability; (b) retirement on or after age sixty-five (65); or (c) Involuntary Termination without Cause, the Holder shall have the right for twelve (12) months after the date of his or her (a) Disability; (b) retirement on or after age sixty-five (65); or (c) Involuntary Termination without Cause, to exercise an Option to the extent such Option is exercisable on the date of his or her (a) Disability; (b) retirement on or after age sixty-five (65); or (c) Involuntary Termination without Cause. If the Holder ceases to be an Eligible Individual by reason of death, the Holder’s designated beneficiary shall have the right for twelve (12) months after the date of death to exercise the Option, to the extent such Option is exercisable on the date of death. At the end of such twelve (12) month period, the Option shall terminate and cease to be payable or exercisable. Notwithstanding any other provision of this Plan or Agreements, no Option shall be payable or exercisable after the expiration of ten (10) years from the date it is granted.  6.2 Transferability of Awards. In addition to such other terms and conditions as may be included in a particular Agreement granting an Award, an Award shall be exercisable during a Holder’s lifetime only by the Holder or by the Holder’s guardian or legal representative. An Award shall not be transferable other than by will or the laws of descent and distribution.    12    Notwithstanding the previous paragraph, the Committee may, in its discretion, authorize all or a portion of an Award to be granted on terms which permit transfer by the Holder to: (i) the Holder’s spouse, children, stepchildren, grandchildren, step grandchildren, parents, stepparents, siblings or step siblings (“Immediate Family Members”); (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members; (iii) a partnership in which such Immediate Family Members are the only partners; or (iv) other persons as the Committee may permit, provided that the Agreement pursuant to which such Award is granted must be: (a) approved by the Committee; (b) expressly provide for transferability in a manner consistent with this Section 6.2; (c) contain representation by the Holder that he understands the effect of such transfer; and (d) release the Committee from any liability in connection with such transfer. Subsequent transfers shall be prohibited except transfers to other Immediate Family Members and transfers by will or the laws of descent and distribution. Following such transfer, any such Award shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer. The events of Termination of Section 6.1 shall continue to apply with respect to the original Holder, following which the Award shall be exercisable by the transferee only to the extent and for the period specified in Section 6.1.  6.3 Cash Out Feature. Upon Holder’s Termination or his ceasing to be employed in a position that has been designated by the Committee as a key employee position, the Corporation shall have the right at any time thereafter, in its sole discretion, to cancel any Award by paying Holder a cash amount that is equal to: (i) the difference between an Option’s Exercise Price and the then Fair Market Value of the Stock times the number of shares covered by the unexercised vested portion of such Holder’s Option; (ii) the difference between a SAR’s Exercise Price and the then Fair Market Value of the Stock times the number of shares covered by the unexercised vested portion of such Holder’s SARs; and (iii) a Phantom Share’s Fair Market Value times the number of shares covered by the unexercised vested portion of such Holder’s Phantom Shares; and (iv) the Fair Market Value of a share of Restricted Stock times the number of shares of Restricted Stock, as applicable. Without limiting the generality of the foregoing, except where the payment would be in the minimum amount necessary to alleviate a Hardship of the Holder, the Corporation will not cancel, or acquire, shares of Restricted Stock until after the six (6) month anniversary of the date on which the restrictions lapse on such shares of Restricted Stock.  6.4 Forfeiture and Restrictions on Transfer.  (A) PRIOR OPTIONS - Each Agreement may contain or otherwise provide for conditions giving rise to the forfeiture of the Stock acquired pursuant to an Award or otherwise and may also provide for those restrictions on the transferability of shares of the Stock acquired pursuant to an Award or otherwise that the Committee in its sole and absolute discretion may deem proper or advisable. The conditions giving rise to forfeiture may include, but need not be limited to, the requirement that the Holder render substantial services to the Corporation or its Affiliates for a specified period of time. The restrictions on transferability may include, but need not be limited to, options and rights of first refusal in favor of the Corporation and shareholders of the Corporation other than the Holder of such shares of Stock who is a party to the particular Agreement or a subsequent holder of the shares of Stock who is bound by that Agreement.    13    No Holder may sell or transfer Stock acquired pursuant to an Award prior to the date that is six (6) months from their receipt of the Stock under such Award.  A Holder may not sell or transfer Stock acquired through the exercise of a Prior Option unless:  (a) the sale or transfer is of the minimum number of shares of Stock necessary to (i) fund the exercise of a Prior Option, (ii) pay any taxes resulting from the exercise of the Prior Option, or (iii) alleviate a Hardship;  (b) the Holder owns shares of Stock sufficient to meet the minimum ownership level set forth in Appendix A;  (c) the six (6) month anniversary of the date on which the Option was exercised to acquire such shares of Stock has occurred, in which case he may sell or transfer fifty percent (50%) of such shares of Stock, less any shares of Stock already sold or transferred under the provisions of the preceding Sections (a) and (b) of this paragraph; or  (d) the two (2) year anniversary of the date on which the Option was exercised to acquire such shares of Stock has occurred.  The minimum ownership level set forth in Appendix A may be changed by the Committee in its sole discretion at any time. The Fair Market Value of all Stock holdings (whether vested or forfeitable) will be considered toward meeting the required ownership level. In addition, a Holder will be treated as owning (i) the Fair Market Value of Stock equal to his account balance in the ClubCorp Employee Stock Ownership Plan as of the Plan’s most recent allocation date; (ii) an amount equal to the difference between the Exercise Price of any Stock Appreciation Right held by Holder over the Fair Market Value of the Stock subject to the Stock Appreciation Rights on such date; (iii) an amount equal to the Fair Market Value of Stock subject to a Phantom Share; and (iv) an amount equal to the number of shares of Restricted Stock held by Holder.  Without limiting the generality of the preceding two paragraphs, in addition, all shares of Stock issued pursuant to an exercise of an Award under this Plan shall be subject to the terms and conditions of the shareholders agreement that the Corporation shall forward to each Holder upon the exercise of an Award. Notwithstanding anything to the contrary in the Plan or the Holder’s Agreement, the Holder shall have no right to have any shares issued to him or her until the Holder has signed the shareholders agreement given to him by the Corporation. Each Agreement may contain or otherwise provide for such other restrictions on the transferability of Stock acquired pursuant to an Award as the Committee, in its sole and absolute discretion, shall deem proper or advisable. Such other restrictions on transferability may include, but need not be limited to, options and rights of first refusal in favor of the Corporation and shareholders of the Corporation.    14        (B) NEW OPTIONS -  Effective for all option grants effective as of September 19, 2003: Each Agreement may contain or otherwise provide for conditions giving rise to the forfeiture of the Stock acquired pursuant to an Award or otherwise and may also provide for those restrictions on the transferability of shares of the Stock acquired pursuant to an Award or otherwise that the Committee in its sole and absolute discretion may deem proper or advisable. The conditions giving rise to forfeiture may include, but need not be limited to, the requirement that the Holder render substantial services to the Company or its Affiliates for a specified period of time. The restrictions of transferability may include, but need not be limited to, options and rights of first refusal in favor of the Company and shareholders of the Company other than the Holder of such shares of Stock who is a party to the particular Agreement or a subsequent holder of the shares of Stock who is bound by that Agreement.  The Holder may not sell or transfer Stock acquired through the exercise of a New Option unless:  (a) the sale or transfer is of the minimum number of shares of Stock necessary to alleviate a Hardship;  (b) the six (6) month anniversary of the date on which the Option was exercised to acquire such shares of Stock has occurred, in which case he may sell or transfer fifty percent (50%) of such shares of Stock, less any shares of Stock already sold or transferred under the provisions of the preceding section (a) of this paragraph;  (c) the two (2) year anniversary of the date on which the Option was exercised to acquire such shares of Stock has occurred; or  (d) the Holder owns shares of Stock sufficient to meet the minimum ownership level set forth in Appendix A.  Without limiting the generality of the preceding two paragraphs, in addition, all shares of Stock issued pursuant to an exercise of an Option under this Plan shall be subject to the terms and conditions of the shareholders agreement that ClubCorp shall forward to each Holder upon the exercise of an Option. Notwithstanding anything to the contrary in the Plan or the Holder’s Agreement, the Holder shall have no right to have any shares issued to him or her until the Holder has signed the shareholders agreement given to him or her by ClubCorp. Each Agreement may contain or otherwise provide for such other restrictions on the transferability of Stock acquired pursuant to an Option as the Committee, in its sole and absolute discretion, shall deem proper or advisable. Such other restrictions on transferability may include, but need not be limited to, options and rights of first refusal in favor of ClubCorp and shareholders of ClubCorp. ClubCorp is under no obligation to purchase Stock from Holder, and in particular has no current plans to purchase any Stock held for less than six (6) months by Holder.    15    Effective for all option grants effective on and after September 20, 2003: Each Agreement may contain or otherwise provide for conditions giving rise to the forfeiture of the Stock acquired pursuant to an Award or otherwise and may also provide for those restrictions on the transferability of shares of the Stock acquired pursuant to an Award or otherwise that the Committee in its sole and absolute discretion may deem proper or advisable. The conditions giving rise to forfeiture may include, but need not be limited to, the requirement that the Holder render substantial services to the Company or its Affiliates for a specified period of time. The restrictions of transferability may include, but need not be limited to, options and rights of first refusal in favor of the Company and shareholders of the Company other than the Holder of such shares of Stock who is a party to the particular Agreement or a subsequent holder of the shares of Stock who is bound by that Agreement.  The Holder may not sell or transfer fifty percent (50%) of the Stock acquired through the exercise of an Option unless the Holder owns shares of Stock sufficient to meet the minimum ownership level set forth in Appendix A.  All shares of Stock issued pursuant to an exercise of an Option under this Plan shall be subject to the terms and conditions of the shareholders agreement that the Company shall forward to each Holder upon the exercise of an Option. Notwithstanding anything to the contrary in the Plan or the Holder’s Agreement, the Holder shall have no right to have any shares issued to him or her until the Holder has signed the shareholders agreement given to him or her by the Company. Each Agreement may contain or otherwise provide for such other restrictions on the transferability of Stock acquired pursuant to an Option as the Committee, in its sole and absolute discretion, shall deem proper or advisable. Such other restrictions on transferability may include, but need not be limited to, options and rights of first refusal in favor of the Company and shareholders of the Company. The Company is under no obligation to purchase Stock from Holder, and in particular has no current plans to purchase any Stock held for less than six (6) months by Holder.  6.5 Conditions to Delivery of Stock. Nothing herein or in any Award granted hereunder or any Agreement shall require the Corporation to issue any shares with respect to any Award if that issuance would, in the opinion of counsel for the Corporation, constitute a violation of the Securities Act or any similar or superseding statute or statutes, any other applicable statute or regulation, or the rules of any applicable securities exchange or securities association, as then in effect. At the time of any exercise of an Option, Stock Appreciation Right, a Phantom Share, or issuance of any Restricted Stock the Corporation may, as a condition precedent to the exercise of such Option, Stock Appreciation Right, Phantom Share, or issuance of Restricted Stock require from the Holder of the Award (or in the event of his death, his legal representatives, heirs, legatees, or distributees) such written representations, if any, concerning the Holder’s (or Holder’s transferee’s) intentions with regard to the retention or disposition of the shares of Stock being acquired pursuant to the Award and such written covenants and agreements, if any, as to the manner of disposal of such shares as, in the opinion of counsel to the Corporation, may be necessary to ensure that any disposition by that Holder (or in the event of the Holder’s death, his legal representatives, heirs, legatees, or distributees) will not involve a violation of the Securities Act or any similar or superseding statute or statutes, any other applicable state or federal statute or regulation, or any rule of any applicable securities exchange or securities association, as then in effect.    16    6.6 Payment with Sale Proceeds. If the Stock has been registered under the Act, then at the request of the Holder (or his transferee) and to the extent permitted by applicable law, the Committee may (but shall not be required to) approve arrangements with a brokerage firm under which that brokerage firm, on behalf of the Holder (or his transferee), shall pay to the Corporation the Exercise Price of the Award being exercised and the Corporation shall promptly deliver the exercised shares of Stock to the brokerage firm. To accomplish this transaction, the Holder (or his transferee) must deliver to the Corporation an Exercise Notice containing irrevocable instructions from the Holder (or his transferee) to the Corporation to deliver the Stock certificates representing the shares of Stock directly to the broker. Upon receiving a copy of the Exercise Notice acknowledged by the Corporation, the broker shall sell that number of shares of Stock or loan the Holder (or his transferee) an amount sufficient to pay the Exercise Price and any withholding obligations due. The broker then shall deliver to the Corporation that portion of the sale or loan proceeds necessary to cover the Exercise Price and any withholding obligations due. The Committee shall not approve any transaction of this nature if the Committee believes that the transaction would give rise to the Holder’s liability for short-swing profits under Section 16(b) of the Act.  6.7 Certain Directors and Officers. With respect to Holders who are directors or officers of the Corporation or any of its Affiliates and who are subject to Section 16(b) of the Act, Awards and all rights under the Plan shall be exercisable during the Holder’s lifetime only by the Holder or the Holder’s guardian or legal representative, but not for at least six (6) months after the Date of grant, unless (a) the Board of Directors expressly authorizes that an Award shall be exercisable before the expiration of the six (6) month period or (b) the death or Disability of the Holder occurs before the expiration of the six (6) month period. In addition, no such officer or director shall exercise any Stock Appreciation Right, Phantom Share or have shares of Stock withheld to pay tax withholding obligations within the first six (6) months of the term of an Award. Any election by any such officer or director to have tax withholding obligations satisfied by the withholding of shares of Stock shall be irrevocable and shall be communicated to the Committee during the period beginning on the third day following the date of release of quarterly or annual summary statements of sales and earnings and ending on the twelfth business day following such date (the “Window Period”) or by an irrevocable election communicated to the Committee at least six (6) months before the date of exercise of the Award for which such withholding is desired. Any election by such an officer or director to receive cash in full or partial settlement of a Stock Appreciation Right, or Phantom Share as well as any exercise by such individual of a Stock Appreciation Right or Phantom Share for such cash, in either case to the extent permitted under the applicable Agreement or otherwise permitted by the Committee, shall be made during the Window Period or within any other periods that the Committee shall specify from time to time.  6.8 Rights as a Shareholder. A Holder (or his transferee) shall have no right as a shareholder with respect to any shares covered by his Award until a certificate representing those shares is issued in his name. No adjustment shall be made for Dividends (ordinary or extraordinary, whether in cash or other property) or distributions or other rights unless otherwise provided in his     17     Agreement. Nevertheless, Dividends, dividend equivalent rights and voting rights may be extended to and made part of any Award denominated in Stock or units of Stock, subject to such terms, conditions and restrictions as the Committee may establish. The Committee may also establish rules and procedures for the crediting of interest on deferred cash payments and dividend equivalents for deferred payment denominated in Stock or units of Stock.  6.9 Furnish Information. Each Holder (or his transferee) shall furnish to the Corporation all information requested by the Corporation to enable it to comply with any reporting or other requirement imposed upon the Corporation by or under any applicable statute or regulation.  6.10 Obligation to Exercise. The granting of an Award hereunder shall impose no obligation to exercise the same or any part thereof.  6.11 Adjustments to Awards. Subject to Section 16(b), Code Section 162(m) and the limitations set forth in this Plan, the Committee may make any adjustment in the Exercise Price of, the number of shares of Stock subject to, or the terms of, an Award, or by canceling the outstanding Award and regranting such Award. Such adjustment shall be made by amending, substituting, or regranting the Award. Such amendment, substitution, or regrant may result in terms and conditions that differ from the terms and conditions of the original Award. The Committee may not, however, impair the rights of any Holder (or his transferee) of previously granted Awards without that Holder’s (or his transferee’s) consent. If such action is effected by amendment, such amendment shall be deemed effective as of the Date of grant of the amended Award.  6.12 Remedies. The Corporation shall be entitled to recover from a Holder (or his transferee) reasonable attorneys’ fees incurred in connection with the enforcement of the terms and provisions of the Plan and any Agreement whether by an action to enforce specific performance or for damages for its breach or otherwise.  6.13 Information Confidential. As partial consideration for the granting of each Award hereunder, the Holder shall agree with the Corporation that he will keep confidential all information and knowledge that he has relating to the manner and amount of his participation in the Plan; provided, however, that such information may be disclosed as required by law and may be given in confidence to the Holder’s spouse, tax or financial advisors, or to a financial institution to the extent that such information is necessary to secure a loan. In the event any breach of this promise comes to the attention of the Committee, it shall take into consideration that breach in determining whether to recommend the grant of any future Award to that Holder, as a factor mitigating against the advisability of granting any such future Award to such individual.  6.14 Consideration. No Award shall be exercisable with respect to a Holder (or his transferee) unless he shall have paid cash or property to, or performed services for, the Corporation or any of its Affiliates that the Committee believes is equal to or greater in value than the par value of the Stock subject to such Award.    18    6.15 Acceleration of Vesting Upon Change of Control. In the event that a Holder ceases to be an Eligible Individual due to a Vesting Acceleration Termination, such Holder’s Awards shall become fully vested and immediately exercisable as of the day before the later to occur of (i) the Vesting Acceleration Termination or (ii) the Change in Control related to the Vesting Acceleration Termination.  SECTION 7. DURATION AND AMENDMENT OF PLAN  7.1 Duration. No Awards may be granted hereunder after the date that is ten (10) years from the date the Plan is adopted by the Board of Directors.  7.2 Amendment. The Board of Directors or the Compensation Committee of the Board of Directors, (“Compensation Committee”) may, insofar as permitted by law, with respect to any shares which, at the time, are not subject to Awards, suspend or discontinue the Plan or revise or amend it in any respect whatsoever and may amend any provision of the Plan or any Agreement to make the Plan or the Agreement, or both, comply with Section 16(b) of the Act and the exemptions from that Section in the regulations thereunder. The Board of Directors or the Compensation Committee may also amend, modify, suspend, or terminate the Plan for the purpose of meeting or addressing any changes in other legal requirements applicable to the Corporation or the Plan or for any other purpose permitted by law. In connection with any amendment of the Plan, the Board of Directors or the Compensation Committee shall be authorized to incorporate such provisions as shall be necessary for amounts paid under the Plan to be exempt from Section 162(m) of the Code.  SECTION 8. GENERAL  8.1 Application of Funds. The proceeds received by the Corporation from the sale of shares pursuant to Awards may be used for any general corporate purpose.  8.2 Right of the Corporation and Affiliates to Terminate Employment. Nothing contained in the Plan, or in any Agreement, shall confer upon any Holder the right to continue in the employ of the Corporation or any Affiliate or interfere in any way with the rights of the Corporation or any Affiliate to terminate the Holder’s employment at any time.  8.3 No Liability for Good Faith Determinations. Neither the members of the Board of Directors nor any member of the Committee shall be liable for any act, omission or determination taken or made in good faith with respect to the Plan or any Award granted under it; and members of the Board of Directors and the Committee shall be entitled to indemnification and reimbursement by the Corporation in respect of any claim, loss, damage, or expense (including attorneys’ fees, the costs of settling any suit, provided such settlement is approved by independent legal counsel selected by the Corporation, and amounts paid in satisfaction of a judgment, except a judgment based on a finding of bad faith) arising therefrom to the full extent permitted by law and under any directors’ and officers’ liability or similar insurance coverage that may from time to time be in effect. This right to indemnification shall be in addition to, and not a limitation on, any other indemnification rights any member of the Board of Directors or the Committee may have.    19    8.4 Other Benefits. Participation in the Plan shall not preclude the Holder from eligibility in any other stock plan or stock option plan of the Corporation or any Affiliate or any old age benefit, insurance, pension, profit sharing retirement, bonus, or other extra compensation plans that the Corporation or any Affiliate has adopted, or may, at any time, adopt for the benefit of its employees. Neither the adoption of the Plan by the Board of Directors nor the submission of the Plan to the shareholders of the Corporation for approval shall be construed as creating any limitations on the power of the Board of Directors to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options and the awarding of stock and cash otherwise than under the Plan and such arrangements may be either generally applicable or applicable only in specific cases.  8.5 Exclusion From Pension and Profit-Sharing Compensation. By acceptance of an Award (regardless of form) each Holder shall be deemed to have agreed that the Award is special incentive compensation that will not be taken into account in any manner as salary, compensation, or bonus in determining the amount of any payment under any pension, retirement, or other employee benefit plan of the Corporation or any Affiliate, unless any pension, retirement, or other employee benefit plan of the Corporation or Affiliate expressly provides that such Award shall be so considered for purposes of determining the amount of any payment under any such plan. In addition, each beneficiary of a deceased Holder shall be deemed to have agreed that the Award will not affect the amount of any life insurance coverage, if any, provided by the Corporation or a Affiliate on the life of the Holder that is payable to the beneficiary under any life insurance plan covering employees of the Corporation or any Affiliate.  8.6 Agreement Requirements. No Award shall be deemed granted unless the key employee or Eligible Individual has signed an Agreement, that is in a form satisfactory to the Corporation. In the event a Holder is determined to have violated the terms of his or her Agreement by a court of competent jurisdiction or pursuant to arbitration, all Awards under this Plan, including vested Awards, will be forfeited as of the date of the violation. In addition, any Stock acquired through the exercise of an Award must be returned to the Corporation. In the case of an Option, the Corporation shall refund to Holder the Exercise Price of such forfeited Stock. If Holder no longer owns the Stock, Holder will owe the Corporation an amount equal to any gain or profit over the Exercise Price that the Holder received on the sale of such Stock and the Corporation has the right to offset this amount from any payments it owes Holder.  8.7 Beneficiary Designation. Each Holder shall have the right to designate a beneficiary on the form provided by the Committee. If no beneficiary is designated, Holder’s estate shall have the right of a beneficiary. If Holder was an Optionee under the ClubCorp, Inc. Executive Stock Option Plan, any beneficiary designation under that Plan will be effective for purposes of this Plan, unless or until otherwise revoked.    20    8.8 Execution of Receipts and Releases. Any payment of cash or any issuance or transfer of shares of Stock to the Holder, or to his legal representative, heir, legatee, or distributee, in accordance with the provisions hereof, shall, to the extent thereof, be in full satisfaction of all claims of such individuals hereunder. The Committee may require any Holder, legal representative, heir, legatee, or distributee, as a condition precedent to such payment, to execute a release and receipt therefor in such form as it shall determine.  8.9 Unfunded Plan. Insofar as it provides for Awards of cash and Stock, the Plan shall be unfunded. Although bookkeeping accounts may be established with respect to Holders who are entitled to cash, Stock, or rights thereto under the Plan, any such accounts shall be used merely as a bookkeeping convenience. The Corporation shall not be required to segregate any assets that may at any time be represented by cash, Stock, or rights thereto, nor shall the Plan be construed as providing for such segregation, nor shall the Corporation, the Board of Directors nor the Committee be deemed to be a trustee of any cash, Stock, or rights thereto to be granted under the Plan. Any liability of the Corporation to any Holder (or his transferee) with respect to a grant of cash, Stock, or rights thereto under the Plan shall be based solely upon any contractual obligations that may be created by the Plan and any Agreement; no such obligation of the Corporation shall be deemed to be secured by any pledge or other encumbrance on any property of the Corporation. Neither the Corporation, the Board of Directors nor the Committee shall be required to give any security or bond for the performance of any obligation that may be created by the Plan.  8.10 No Guarantee of Interests. Neither the Committee nor the Corporation guarantees the Stock from loss or depreciation.  8.11 Payment of Expenses. All expenses incident to the administration, termination, or protection of the Plan, including, but not limited to, legal and accounting fees, shall be paid by the Corporation or its Affiliates; provided, however, the Corporation or an Affiliate may recover any and all damages, fees, expenses, and costs arising out of any actions taken by the Corporation to enforce its right to purchase Stock under this Plan.  8.12 Corporation Records. Records of the Corporation or its Affiliates regarding the Holder’s period of employment, Termination and the reason therefor, leaves of absence, re-employment, and other matters shall be conclusive for all purposes hereunder, unless determined by the Committee to be incorrect.  8.13 Information. The Corporation and its Affiliates shall, upon request or as may be specifically required hereunder, furnish or cause to be furnished all of the information or documentation which is necessary or required by the Committee to perform its duties and functions under the Plan.  8.14 No Liability of Corporation. The Corporation assumes no obligation or responsibility to the Holder or his legal representatives, heirs, legatees, or distributees for any act of, or failure to act on the part of, the Committee.    21    8.15 Corporation Action. Any action required of the Corporation shall be by resolution of its Board of Directors or by an individual authorized to act for the Corporation.  8.16 Arbitration. Any legal or equitable claims or disputes arising out of or related to the Plan or this Agreement, shall be resolved by binding arbitration. The arbitration proceedings shall be conducted in Dallas, Texas in accordance with the Employment Dispute Resolution Rules (“EDR Rules”) of the American Arbitration Association (“AAA”) in effect at the time a demand for arbitration is made. Prior to filing any claim for arbitration, the parties agree to attend a full day of mediation to attempt to resolve the claim or dispute. If the mediation is unsuccessful, either party can file an arbitration claim as described herein.  One arbitrator shall be used and shall be chosen by mutual agreement of the parties. If, within thirty (30) days no arbitrator has been chosen, an arbitrator shall be chosen from a list or lists of proposed arbitrators submitted by the AAA pursuant to its EDR Rules, except that (i) the number of preemptory strikes shall not be limited, and (ii) if the parties fail to select an arbitrator from one or more lists, within sixty (60) days after the Holder notifies the Corporation of an arbitrable dispute, AAA shall have the power to appoint the arbitrator. The arbitrator shall coordinate, and limit as appropriate, all pre-arbitral discovery, which shall include document production, information requests, and depositions. The arbitrator shall issue a written decision and award stating the reasons therefor. The decision and award shall be final and binding on both parties, their heirs, executors, administrators, successors, and assigns. The costs and expenses of the arbitration shall be borne evenly by the parties.  8.17 Severability. In the event that any provision of this Plan, or the application hereof to any individual or circumstance, is held by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect under present or future laws effective during the effective term of any such provision, such invalid, illegal, or unenforceable provision shall be fully severable; and this Plan shall then be construed and enforced as if such invalid, illegal, or unenforceable provision had not been contained in this Plan; and the remaining provisions of this Plan shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance from this Plan. Furthermore, in lieu of each such illegal, invalid, or unenforceable provision, there shall be added automatically as part of this Plan a provision as similar in terms to such illegal, invalid, or unenforceable provision as may be possible and be legal, valid, and enforceable. If any of the terms or provisions of this Plan conflict with the requirements of Rule 16b-3 (as those terms or provisions are applied to Eligible Individuals who are subject to Section 16(b) of the Act), then those conflicting terms or provisions shall be deemed inoperative to the extent they so conflict with the requirements of Rule 16b-3 and, in lieu of such conflicting provision, there shall be added automatically as part of this Plan a provision as similar in terms to such conflicting provision as may be possible and not conflict with the requirements of Rule 16b-3.  8.18 Notices. Whenever any notice is required or permitted hereunder, such notice must be in writing and personally delivered or sent by mail. Any notice required or permitted to be delivered hereunder shall be deemed to be delivered on the date on which it is actually received by the Corporation addressed to the attention of the Corporate Secretary at the Corporation’s office as     22     specified in the applicable Agreement. The Corporation or a Holder (or his transferee) may change, at any time and from time to time, by written notice to the other, the address which it or he had previously specified for receiving notices. Until changed in accordance herewith, the Corporation and each Holder shall specify as its and his address for receiving notices the address set forth in the Agreement pertaining to the shares to which such notice relates. Any person entitled to notice hereunder may waive such notice.  8.19 Successors. The Plan shall be binding upon the Holder, his legal representatives, heirs, legatees, and distributees, upon the Corporation, its successors and assigns and upon the Committee and its successors.  8.20 Headings. The titles and headings of Sections and Subsections are included for convenience of reference only and are not to be considered in construction of the provisions hereof.  8.21 Governing Law. All questions arising with respect to the provisions of the Plan shall be determined by application of the laws of the State of Texas, without giving effect to any conflict of law provisions thereof, except to the extent Texas law is preempted by federal law. The obligation of the Corporation to sell and deliver Stock hereunder is subject to applicable federal, state and foreign laws and to the approval of any governmental authority required in connection with the authorization, issuance, sale, or delivery of such Stock.  8.22 Word Usage. Words used in the masculine shall apply to the feminine where applicable, and wherever the context of this Plan dictates, the plural shall be read as the singular and the singular as the plural.  SECTION 9. EFFECTIVE DATE.  The Plan, as restated, shall be effective as of January 1, 2005.    23    APPENDIX A           Salary Level       Percent of Base Pay  Above Level 14      200%     Levels 14 and above with membership on the Operations Committee.      200%     Level 13 with membership on the Operations Committee.      100%     Levels 14 and 13 without membership on the Operations Committee and Levels 12, 11, 10 and 9.      No minimum    24      EX-10.27 6 dex1027.htm RESTATED CLUBCORP EMPLOYEE STOCK OWNERSHIP PLAN   Restated ClubCorp Employee Stock Ownership Plan   Exhibit 10.27  CLUBCORP EMPLOYEE STOCK OWNERSHIP PLAN  (“ESOP”)  (As Amended and Restated, Effective July 1, 2003)    TABLE OF CONTENTS                      Page  ARTICLE 1. - PURPOSE AND AMENDMENT OF THE PLAN    1                          1.01    Amendment of the Plan    1                          1.02    Purpose    1                          1.03    Trust Agreement    1  ARTICLE 2. - DEFINITIONS    2  ARTICLE 3. - REQUIREMENTS FOR ELIGIBILITY AND PARTICIPATION    15                          3.01    Eligibility    15                          3.02    Employment with a Predecessor Employer    15                          3.03    Change in Status of Eligible Employee.    15                          3.04    Participation in the Plan    16                          3.05    Military Service    16  ARTICLE 4. - CONTRIBUTIONS    17                          4.01    Employer Contributions    17                          4.02    Matching Contributions    17                          4.03    Date of Payment of Matching Contributions, Discretionary Contributions and Pre-Tax Contributions    17                          4.04    Pre-Tax Contributions; Change of Election.    17                          4.05    Limitation on Pre-Tax Contributions for Highly Compensated Employees    18                          4.06    Distribution of Excess Deferrals    23                          4.07    Limitation on Matching Contributions    24                          4.08    General Withdrawal from After-Tax Contribution Account    27                          4.09    General Withdrawal of Pre-Tax Contributions and Distribution Restrictions.    27                          4.10    Hardship Withdrawals from After-Tax Contribution Account and Pre-Tax Contribution Account.    28                          4.11    Procedure for Withdrawal.    29                          4.12    Discretionary Contributions    30                          4.13    Securities Law Limitations on Contributions    30  ARTICLE 5. - ALLOCATION TO PARTICIPANTS’ ACCOUNTS    31                          5.01    Trust Accounts    31                          5.02    Contribution Allocations to Accounts.    31                          5.03    Time of Allocating Contributions    34                          5.04    Accounts of Participants Transferred to an Affiliated Company Which Has Not Adopted the Plan    34                          5.05    Treatment of Company Stock Purchased under an Exempt Loan.    34                          5.06    Limitation on Annual Additions Under Code section 415    36                          5.07    Limitations on Annual Additions for Employers or Affiliated Companies Maintaining other Defined Contribution Plans    37                          5.08    Definitions for Purposes of Determining the Annual Addition Limitations    37                          5.09    Cessation of Eligible Employee Status    39                          5.10    Inclusion of Ineligible Employee and Erroneous Allocations    39    i            ARTICLE 6. - VALUATION OF TRUST FUND    40                          6.01    Valuation of the Trust Fund and Account Statements.    40                          6.02    Forfeitures.    40                          6.03    Trust Fund    40                          6.04    Voting of Shares; Exercise of Other Rights    40                          6.05    Put Option with Respect to Company Stock    41                          6.06    Exempt Loan to Purchase Company Stock; Certain Conditions Applicable to Such Company Stock    41                          6.07    Diversification of Participant’s Account    44                          6.08    Emergency Valuation    44  ARTICLE 7. - RETIREMENT BENEFITS    45  ARTICLE 8. - DISABILITY BENEFITS    46                          8.01    Disability Retirement    46                          8.02    Determination of Disability    46  ARTICLE 9. - DEATH BENEFITS    47                          9.01    Death Benefits    47                          9.02    Designation of Beneficiaries.    47  ARTICLE 10. - EMPLOYMENT TERMINATION BENEFITS    49                          10.01    Vesting upon Termination of Employment    49                          10.02    Determination of Vesting Years of Service    50                          10.03    Vesting on Divestiture of an Employer    50                          10.04    Forfeiture of Employer Contribution Account.    50                          10.05    Restoration of Forfeited Accounts.    51  ARTICLE 11. - PAYMENT OF BENEFITS    52                          11.01    Method of Payment.    52                          11.02    Time for Distribution of Benefits    52                          11.03    Limitations on Timing    53                          11.04    Restrictions on Distribution    53                          11.05    Payments on Personal Receipt Except in Case of Legal Disability    54                          11.06    Benefits Payable Pursuant to a Qualified Domestic Relations Order    54                          11.07    Direct Rollovers.    54  ARTICLE 12. - MISCELLANEOUS PROVISIONS RESPECTING PARTICIPANTS    57                          12.01    Participants to Furnish Required Information.    57                          12.02    Participants’ Rights in Trust Fund    57                          12.03    Inalienability of Benefits.    57                          12.04    Conditions of Employment Not Affected by Plan    59                          12.05    Address for Mailing of Benefits.    59                          12.06    Unclaimed Account Procedure.    59                          12.07    No Rollovers    60    ii            ARTICLE 13. - ADMINISTRATION OF THE PLAN    61                          13.01    Plan Administrator    61                          13.02    Compensated Expenses of the Plan Administrator    61                          13.03    Agents of the Plan Administrator    61                          13.04    Reliance on Directions of Plan Administrator    61                          13.05    Authority of Plan Administrator    61                          13.06    Authorization of Loan Transactions    62                          13.07    General Administrative Powers    62                          13.08    Additional Powers    62                          13.09    Duties of Administrative Personnel    62                          13.10    Designation of Named Fiduciaries and Allocation of Responsibility    63                          13.11    Action by Fiduciaries.    63                          13.12    Appointment of Professional Assistants and the Investment Manager    63                          13.13    Bond    64                          13.14    Indemnification    64                          13.15    Payment of Expenses    64  ARTICLE 14. - PARTICIPATION BY EMPLOYERS    65                          14.01    Adoption of Plan by Affiliated Company    65                          14.02    Rights and Obligations of the Company and the Employers    65                          14.03    Withdrawal from Plan    65  ARTICLE 15. - AMENDMENT OF THE PLAN    66  ARTICLE 16. - PERMANENCY OF THE PLAN    67                          16.01    Right to Terminate Plan    67                          16.02    Merger or Consolidation of Plan and Trust    67                          16.03    Continuance by Successor Company    67  ARTICLE 17. - DISCONTINUANCE OF CONTRIBUTIONS AND TERMINATION    68                          17.01    Suspension of Contributions    68                          17.02    Discontinuance of Contributions    68                          17.03    Termination of Plan and Trust    68                          17.04    Participant’s Rights to Benefits upon Termination or Partial Termination of Plan or Complete Discontinuance of Contributions    68  ARTICLE 18. - EXCLUSIVE BENEFIT OF THE PLAN    68                          18.01    Limitation on Reversions    68                          18.02    Unallocated Amounts upon Termination of Plan and Trust    69                          18.03    Mistake of Fact or Disallowance of Deduction    69  ARTICLE 19. - TOP HEAVY PLAN RULES    70                          19.01    Definitions.:    70                          19.02    Determination of Top Heaviness.    71                          19.03    Minimum Requirements    72  ARTICLE 20. - MISCELLANEOUS    75                          20.01    Effect of Bankruptcy and Other Contingencies Affecting an Employer    75                          20.02    Benefits Payable by Trust    75                          20.03    Withholding    75                          20.04    Provisions Hereof for Sole Benefit of Parties Hereto and Participants    75                          20.05    Article and Section Headings    75                          20.06    Formal Action by Employer    75                          20.07    APPLICABLE LAW.    76    iii    CLUBCORP EMPLOYEE STOCK OWNERSHIP PLAN  ARTICLE 1. - PURPOSE AND AMENDMENT OF THE PLAN  1.01 Amendment of the Plan. Brookhaven Country Club, Inc. adopted and established a profit sharing plan known as the Profit Sharing Plan and Trust of Brookhaven Club, Inc. effective as of January 1, 1968, which was thereafter, amended, restated, and renamed into the CCA Associate Clubs Profit Sharing Plan effective January 1, 1976 (the “CCA Plan”). Subsequent thereto, the CCA Plan was amended from time to time. Sponsorship of the CCA Plan was transferred to Club Corporation International (now known as ClubCorp, Inc.) (the “Company”) effective February 1, 1992. Effective as of January 1, 1993, the Company amended and restated the CCA Plan in its entirety as the “ClubCorp Stock Investment Plan (the “SIP”).” The SIP was last amended and restated effective generally as of January 1, 1997. The SIP was again amended and restated into an employee stock ownership plan effective generally as of January 1, 1999, to be known as the ClubCorp Employee Stock Ownership Plan (“Prior Plan”). The Prior Plan was amended and restated in its entirety effective January 1, 2001 (“Restated Plan”) to bring the Prior Plan into compliance with the requirements of the General Agreement on Tariffs and Trade (“GATT”) portion of the Uruguay Round Agreements Act of 1994, the Uniformed Services Employment and Reemployment Right Act of 1994 (“USERRA”), the Small Business Job Protection Act of 1996 (“SBJPA”), the Taxpayer Relief Act of 1997 (“TRA >97”) the Internal Revenue Service Restructuring and Reform Act of 1998 (“1998 Act”) and the Community Renewal Tax Relief Act of 2000 (“2000 Act”). The Restated Plan has since been amended eight times. The Restated Plan is hereby again amended and restated in its entirety effective July 1, 2003 (“Plan”).  1.02 Purpose. The purposes of the Plan are: to provide retirement benefits to Participants and their Beneficiaries; to encourage Eligible Employees to save for retirement; to provide Participants the opportunity to share in the value of the Company, and to enhance employee ownership of the Company.  It is the intention of the Employers that the Plan as amended and restated herein shall meet all of the requirements necessary or appropriate to qualify it as an employee stock ownership plan under Code sections 401(a) and 4975(e) and that the Trust made a part hereof shall continue to be exempt from tax under Code section 501(a) and that the Plan satisfy applicable requirements of ERISA, and all provisions hereof shall be interpreted accordingly.  The Plan is intended: (i) to qualify as an eligible individual account plan under ERISA; and (ii) to provide participants with the benefits reflecting the risks and rewards of equity ownership and not to provide a fixed retirement benefit.  1.03 Trust Agreement. In furtherance of this Plan, the Company has entered into the ClubCorp Employee Stock Ownership Trust Agreement effective as of January 1, 1999, which is made a part hereof, for the purpose of maintaining the Trust to fund the benefits of this Plan as hereinafter set forth.    1    ARTICLE 2.- DEFINITIONS  As used in the Plan:  2.01 “Account” or “Accounts” means all or any of the Company Stock Account, the Other Investments Account, the Employer Divestiture Account, the QDRO Account and any other account maintained by the Plan Administrator under the provisions of the Plan to record a Participant’s interest (or the undistributed interest of a Beneficiary or Alternate Payee) in the Trust Fund, as adjusted in accordance with Article 6.  2.02 “Affiliated Company” means any of the following: the Company and (i) a member of a controlled group of corporations of which the Company is a member, (ii) an unincorporated trade or business which is under common control with the Company as determined in accordance with Code section 414(c) and regulations issued thereunder, (iii) a member of an “affiliated service group” as determined in accordance with Code section 414(m) and regulations issued thereunder, of which the Company or an Employer is a member, or (iv) any other entity which is required to be aggregated with the Company or an Employer in accordance with Code section 414(o) and the regulations issued thereunder. Subject to Code section 415(h), a “controlled group of corporations” shall mean a controlled group of corporations as defined in Code section 414(b).  2.03 “After-Tax Contribution Account” means the separate account maintained for each Participant reflecting the After-Tax Contributions made by such Participant to this Plan, as adjusted in accordance with the provisions of Article 6 of the Plan.  2.04 “After-Tax Contributions” means the amount prior to July 1, 1995 each Participant elected to contribute to the SIP.  2.05 “Allocation Date” means the last day of each calendar quarter.  2.06 “Alternate Payee” means an individual or trust entitled to benefits under the Plan pursuant to a Qualified Domestic Relations Order.  2.07 “Beneficiary” means any person or entity entitled to receive benefits which are payable upon or after a Participant’s death pursuant to Article 9.  2.08 “Board” means the Board of Directors of the Company, as from time to time constituted, acting pursuant to delegated authority.  2.09 “Code” means the Internal Revenue Code of 1986, as amended from time to time. References to any Section of the Internal Revenue Code shall include any successor provision thereto.  2.10 “Company” means ClubCorp, Inc., or its successor.    2    2.11 “Company Stock Account” means the separate accounts maintained for each Participant under his Pre-Tax Contribution Account and Employer Contribution Account, which are invested in Company Stock.  2.12 “Company Stock” means the common stock of the Company, par value $.01.  2.13 “Compensation” means with respect to all Participants except for those Participants employed by ClubCorp International Resource Company who are nonresident aliens who receive no earned income (within the meaning of Code section 911(d)(2)) which is U.S. source income (within the meaning of Code section 861(a)(3)), a Participant’s total compensation for services rendered to an Employer during a Plan Year, as reported on Form W-2 or other federal wage statement as taxable for federal income tax purposes; provided, however, that Compensation shall not include any Compensation paid for any period prior to participation in the Plan or any of the following forms of Compensation: relocation allowances, geographic differentials, car allowances, income imputed for use of a car, noncash compensation, and stock appreciation rights.  Notwithstanding anything in this Section 2.13 to the contrary, Compensation with respect to only those employees of ClubCorp International Resource Company who are nonresident aliens who receive no earned income (within the meaning of Code section 911(d)(2)) which is U.S. source income (within the meaning of Code section 861(a)(3)) shall mean (i) such Participant’s wages, salaries, earned income (only if an employee within the meaning of Code section 401(c)(1)) which includes foreign earned income (as defined in Code section 911(b)) whether or not excludable from gross income under Code section 911, foreign earned income (as defined in Code section 911(b)) whether or not excludable from gross income under Code section 911, fees for professional services, and other amounts received from an Employer for personal services actually rendered in the course of employment with an Employer as an Employee to the extent that the amounts are includible in gross income (including, but not limited to, commissions paid salesmen, overtime pay, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits, and reimbursements or other expense allowances under a nonaccountable plan, as described in Treasury Regulations Section 1.62-2(c)), but determined without regard to the exclusions found in Code sections 931 and 933, (ii) amounts received by such Participant described in Code sections 104(a)(3), 105(a) and 105(h), but only to the extent that these amounts are includible in the gross income of the Employee, (iii) amounts paid or reimbursed by the Employer to such Participant for moving expenses incurred by such Participant, but only to the extent that at the time of payment it is reasonable to believe that these amounts are not deductible by such Participant under Code section 217, (iv) the value of nonqualified stock options granted to such Participant, but only to the extent that the value of the option is includible in the gross income of such Participant for the taxable year in which granted, and (v) the amount includible in the gross income of such Participant upon making the election described in Code section 83(b), but excluding the following:  2.13(1) Employer contributions to a plan of deferred compensation to the extent contributions are not included in gross income of the Participant for the taxable year in which contributed, and any distributions from a plan of deferred compensation whether or not includible in the gross income of the Participant when distributed;  2.13(2) Employer contributions made on behalf of the Participant to a simplified employee pension described in Code section 408(k);    3    2.13(3) amounts realized from the exercise of a nonqualified stock option, or when restricted stock (or property) held by the Participant becomes freely transferable or is no longer subject to a substantial risk of forfeiture;  2.13(4) amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; and  2.13(5) amounts that receive special tax benefits, or contributions made by the Employer (whether or not under a salary reduction agreement) towards the purchase of an annuity contract described in Code section 403(b) (whether or not the contributions are excludable from the gross income of the Participant);  provided, however, that Compensation shall not include any Compensation paid for any period prior to participation in the Plan or any of the following forms of Compensation: relocation allowances, geographic differentials, car allowances, income imputed for use of a car, noncash compensation and stock appreciation rights. Notwithstanding the foregoing, Compensation shall include the amount of a Participant’s elective salary reductions or salary deferrals under any Employer’s cafeteria plan established pursuant to Code section 125, an Employer’s plan established pursuant to Code sections 402(g)(3) and 457 and amounts excluded from gross income of a Participant under section 132(f) of the Code.  The Compensation of each Participant taken into account in determining allocations for any Plan Year shall not exceed $200,000, as adjusted for cost-of-living increases in accordance with section 401(a)(17)(B) of the Code. “Compensation” means Compensation during the Plan Year or such other consecutive 12-month period over which Compensation is otherwise determined under the Plan (the determination period). The cost-of-living adjustment in effect for a calendar year applies to Compensation for the determination period that begins with or within such calendar year.  2.14 “Date of Employment” or “Date of Reemployment” means the day on which an Employee first commences employment or reemployment following a Termination of Employment, as the case may be, with any Affiliated Company by performing an Hour of Service.  2.15 “Disability” means a physical or mental condition which, in the opinion of the Plan Administrator, pursuant to consistently applied guidelines, medical reports, and other evidence satisfactory to the Plan Administrator, causes a Participant to be unable to engage in any substantial gainful employment with the Employer for an indefinite period; provided, however, the Participant shall not be deemed to have incurred a Disability if the Participant’s Disability arises under any of the following circumstances:  2.15(1) Injury or disease sustained as a result of excessive and habitual use of drugs, intoxicating liquors, or narcotics.  2.15(2) Injury or disease sustained while willfully participating in any acts of violence, riots, civil insurrection, or while committing a felony.  2.15(3) Injury or disease sustained while serving in the Armed Forces or as a result of warfare.    4    2.15(4) Injury or disease sustained while rendering services as an employee to an employer other than the Employer or an Affiliated Company.  2.15(5) Any intentional or self-inflicted injury.  2.16 “Discretionary Contribution” means the amount contributed by the Employer to the Plan on behalf of a Participant pursuant to Section 4.12.  2.17 “Effective Date” means January 1, 2001, except as specifically provided otherwise in the Plan.  2.18 “Election Period” means two (2) enrollment periods, each approximately one month in duration, to be held during the Plan Year as determined annually and announced by the Plan Administrator.  2.19 “Eligibility Year of Service” means an Employment Period during which such Employee performs one thousand (1,000) or more Hours of Service. For purposes of determining an Employee’s Eligibility Year of Service, the initial “Employment Period” to be used shall be the twelve (12) consecutive month period beginning on an Employee’s Date of Employment and thereafter the Plan Year, beginning with the Plan Year within which occurs the Employee’s first anniversary of his Date of Employment. Any Employee who is credited with one thousand (1,000) or more Hours of Service with any Affiliated Company in either the initial twelve (12) month period beginning on such Employee’s Date of Employment or the Plan Year within which such initial twelve (12) month period ends, shall be credited with an Eligibility Year of Service. For purposes of determining an Employee’s Eligibility Year of Service, an Employee, upon completion of an Hour of Service for an Employer, shall receive credit for service with any club which is not an Affiliated Company but which is a club managed by the Company or a club which the Company manages or owns pursuant to a joint venture with another entity, but only for service while such club is managed or partially owned.  2.20 “Eligible Employee” means any Employee except the following individuals: (i) any Employee who is included in a unit of employees covered by a collective bargaining agreement between employee representatives and one (1) or more Employers if retirement benefits were the subject of good faith bargaining between such representatives and employees, unless the collective bargaining agreement expressly provided for the inclusion of such Employees as Eligible Employees under this Plan, (ii) except as provided in this Section 2.20, a nonresident alien who receives no earned income within the meaning of Code section 911(d)(2)) which is U.S. source income (within the meaning of Code section 861(a)(3)), and (iii) except as provided in Section 3.02, any person who is not treated as an employee on the payroll of an Employer, regardless of whether such person is considered a leased employee within the meaning of Code sections 414(n) and 414(o). Notwithstanding anything in the Plan to the contrary, all employees of ClubCorp International Resource Company shall be classified and treated as Eligible Employees regardless of whether such Employees are nonresident aliens who receive no earned income (within the meaning of Code section 911(d)(2)) which is U.S. source income (within the meaning of Code section 861(a)(3)).  2.21 “Employee” means any person who is employed by one or more Affiliated Companies, and whose remuneration from an Affiliated Company is subject to FICA withholding; provided, however, that a person employed by ClubCorp International Resource Company who is a     5     nonresident alien who receives no earned income (within the meaning of Code section 911(d)(2)) which is U.S. source income (within the meaning of Code section 861(a)(3)) shall be deemed to be an Employee regardless of whether such person’s remuneration is subject to FICA withholding. Any leased employee shall be considered an “Employee” under the Plan to the extent required by Code sections 414(n) or 414(o), but shall not be eligible to participate in the Plan unless and until he actually becomes employed on the payroll of an Employer and otherwise meets the eligibility criteria of Article 3.  2.22 “Employer” means the Company or any corporation that is an Affiliated Company which adopts the Plan pursuant to Article 14.  2.23 “Employer Contribution Account” means the separate account maintained for each Participant comprised of his Company Stock Account and Other Investment Account reflecting the Matching Contributions and/or Discretionary Contributions made on behalf of such Participant. The Employer Contribution Account shall be credited with all Matching Contributions allocated to such Participant, Discretionary Contributions allocated to such Participant, profit sharing contributions allocated to the Participant prior to January 1, 1993, if any, and employer matching contributions made to the Club Corporation of America Employees Savings and CCA Investment Plan prior to January 1, 1993, if any, which were transferred to the Plan, as adjusted in accordance with the provisions of Article 6.  2.24 “Employer Contribution” means the amount contributed by the Employer as a Matching and/or Discretionary Contribution and allocated to either the Company Stock Account or the Other Investment Account of each Participant, as appropriate.  2.25 “Employer Divestiture Account” means a separate, fully vested account which is maintained for a Participant who transfers from one Employer to another Employer as a result of the divestiture of the original Employer, as provided in Section 10.03.  2.26 “Entry Date” means each business day.  2.27 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time. References to any Section of ERISA shall include any successor provision thereto.  2.28 “Exempt Loan” means a loan which is used to purchase Company Stock and which meets all of the requirements of Section 6.06.  2.29 “Hour of Service” means the following:  2.29(1) Performance of Duties. Each hour for which an Employee is directly or indirectly paid, or entitled to payment by an Affiliated Company for the performance of duties. Each such Hour of Service shall be credited to the Employment Period (as defined in Section 2.19) or the Plan Year, as the case may be, in which the duties were performed. For purposes of this Section, the applicable Employment Period or Plan Year, as the context requires, shall be referred to as the “Computation Period. “    6    2.29(2) Back Pay. Each hour for which back pay (irrespective of mitigation of damages) has been either awarded or agreed to by an Affiliated Company. Each such Hour of Service shall be credited to the Computation Period to which the agreement or award for back pay pertains, rather than to the Computation Period in which the award, agreement, or payment is made. If back pay is either awarded or agreed to for a period of time during which no duties are performed, the provisions of Subsections 2.29(3)(a) through (c) shall apply to the calculation and crediting of Hours of Service for such period of time.  2.29(3) Non-Working Time. Each hour for which an Employee is directly or indirectly paid, or entitled to payment, by an Affiliated Company for reasons other than the performance of duties (irrespective of whether the employment relationship with such Affiliated Company has terminated) (such as vacations, holidays, illness, disability, layoff, jury duty, military duty, compensated Leave of Absence, or similar periods). Each such Hour of Service shall be calculated and credited on the following basis:  (a) Units of Time. If payments for reasons other than the performance of duties are calculated on the basis of units of time, such as hours, days, weeks, or months, the number of Hours of Service to be credited shall be the number of regularly scheduled working hours included in the units of time on the basis of which the payments are calculated. In the case of an Employee without a regular work schedule, such Employee shall be credited with Hours of Service on the basis of the equivalency schedule set forth in Subsection 2.29(8). Each such Hour of Service shall be credited to the Computation Period in which the period during which no duties are performed occurs, beginning with the first unit of time to which the payment relates.  (b) No Units of Time. If payments for reasons other than the performance of duties are not calculated on the basis of units of time (such as lump sum disability payments for an injury), the number of Hours of Service to be credited shall be equal to the amount of the payment divided by the Employee’s most recent hourly rate of compensation before the period during which no duties are performed.  (i) In the case of an Employee whose compensation is determined on the basis of a fixed rate for specified periods of time (other than hours), such as days, weeks, or months, such Employee’s hourly rate of compensation shall be such Employee’s most recent rate of compensation for a specified period of time (other than hours), divided by the number of hours regularly scheduled for the performance of duties during such period. In the case of an Employee without a regular work schedule, such Employee’s rate of compensation shall be calculated on the basis of the schedule of equivalent hours set forth in Subsection 2.29(8).  (ii) In the case of an Employee whose compensation is not determined on the basis of an hourly rate or on the basis of a fixed rate for specified periods of time, such Employee’s hourly rate of compensation shall be the lowest hourly wage paid to employees in the same job classification as that of such Employee or, if no employees in the same classification have an hourly rate of compensation, the minimum wage as established from time to time under Section 6(a)(1) of the Fair Labor Standards Act of 1938, as amended.  Each such Hour of Service shall be credited to the Computation Period in which the period during which no duties are performed occurs, except that if such period extends beyond one of such Computation Periods, such Hours of Service shall be allocated by the Plan Administrator, in its sole     7     discretion, between not more than the first two of such Computation Periods on a reasonable basis which is consistently applied with respect to all Employees within the same job classification, reasonably defined.  (c) Exclusions. Notwithstanding the foregoing:  (i) An Employee shall not be credited on account of a period during which no duties are performed with a number of Hours of Service which is greater than the number of hours regularly scheduled for the performance of duties during such period.  (ii) In no event shall the number of Hours of Service attributable to a single continuous period (whether or not such period involves more than one Computation Period) for which no duties are performed exceed five hundred one (501) Hours of Service.  (iii) Hours of Service shall not be credited to a period for which payments are made to an Employee where those payments solely reimburse such Employee for medical or medically related expenses incurred by such Employee.  (iv) Hours of Service shall not be credited for a period to which payments pertain if such payments are made or due under a plan maintained solely for the purpose of complying with applicable worker’s compensation, unemployment compensation, or disability insurance laws.  2.29(4) No Duplication of Credit. An Employee shall not be credited with Hours of Service under both (i) Subsection 2.29(1) or 2.29(3), as the case may be, and (ii) Subsection 2.29(2).  2.29(5) Overlapping Payroll Periods. In the case of Hours of Service to be credited to an Employee for a period of no more than thirty-one (31) days which overlaps two (2) Computation Periods, all such Hours of Service shall be credited to either the first or the second of such Computation Periods as the Plan Administrator, in its sole discretion, may determine on a consistent basis with respect to all Employees within the same job classification, reasonably defined.  2.29(6) Maternity or Paternity Absences. Notwithstanding any other provision of this Section to the contrary, solely for purposes of determining whether an Employee has a One-Year Break in Service, Hours of Service shall include hours during which an Employee is absent from work for any period: (i) by reason of (a) the Employee’s pregnancy, (b) the birth of the Employee’s child, (c) the placement of a child with the Employee in connection with the adoption of such child by the Employee, or (ii) for the purpose of caring for such child for a period beginning immediately following such birth or placement. Hours of Service shall be credited for purposes of this Subsection to the Plan Year in which the absence from work begins, provided crediting of such Hours of Service in such Plan Year would prevent the Participant from incurring a One-Year Break in Service in such Plan Year solely because of the crediting of such Hours in such Plan Year. In any other case, Hours of Service shall be credited for purposes of this Subsection to the immediately following Plan Year. The Hours of Service credited for purposes of this Subsection shall be those hours which otherwise normally would have been credited but for such absence or, in any case in which the Plan Administrator is unable to determine the hours normally credited, Hours of Service shall be calculated on the basis of the schedule of equivalent hours set forth in Subsection 2.29(8). The total number of Hours of Service required to be credited for any absence described in this     8     Subsection shall not exceed five hundred one (501). Notwithstanding the provisions of this Subsection, no Hours of Service credit shall be given pursuant to this Subsection unless the Employee furnishes the Plan Administrator with such information as the Plan Administrator shall require to establish: (i) that the absence from work was for the reasons referred to herein, and (ii) the number of days for which there was such an absence.  2.29(7) Uncompensated Leaves of Absence. Solely for purposes of determining whether an Employee has a One-Year Break in Service, Hour of Service shall include each hour (credited on the basis of the schedule of equivalent hours set forth in Subsection 2.29(8)) for which an Employee is not paid but is on a Leave of Absence.  2.29(8) Determination of Hours of Service to be Credited to Salaried Employees. With respect to salaried employees whose hours are not required to be counted and recorded by the Fair Labor Standards Act of 1938, the determination of the Hours of Service which must be credited to an Employee in accordance with the provisions of this Section shall be based upon an equivalency schedule of ten (10) Hours of Service for each day on which the Employee performs an Hour of Service.  2.29(9) Employees of Cobblestone Golf Companies, Inc. Notwithstanding anything in this Section to the contrary, as to any Employee who became employed by an Employer on March 31, 1999 and who was employed by the Cobblestone Golf Companies, Inc. on March 30, 1999, Hours of Service shall include service with Cobblestone Golf Companies, Inc., that would have been Hours of Service if Cobblestone Golf Companies, Inc. were an Employer.  2.30 “Leave of Absence” means an absence from the active employment of an Employer by reason of an approved absence granted by such Employer on the basis of a uniform policy applied by such Employer without discrimination. Such a Leave of Absence will not constitute a Termination of Employment provided the Employee returns to the active employment of the Employer at or prior to the expiration of his leave or, if not specified therein, within the period of time which accords with such Employer’s policy with respect to permitted absences. If the Employee does not return to the active employment of such Employer at or prior to the expiration of his Leave of Absence, his employment will be considered terminated as of the date on which his leave expires. Notwithstanding the foregoing provisions of this Section, absence from the active service of the Employer because of military service will be considered a Leave of Absence granted by an Employer and will not terminate the employment of an Employee if he returns to the active employment of an Employer within the period of time during which he has reemployment rights under any applicable federal law or within sixty (60) days from and after discharge or separation from such military service if no federal law is applicable. However, no provision of this Section or of the remainder of the Plan shall require reemployment of any Employee whose active service with an Employer was terminated by reason of military service.  2.31 “Matching Contributions” means the amount the Employer contributes on behalf of each Participant pursuant to Section 4.02.  2.32 “Normal Retirement Date” means the date on which occurs the sixty-fifth (65th) birthday of a Participant.    9    2.33 “One-Year Break in Service” means a Plan Year during which a Participant has no Hours of Service.  2.34 “Other Investments Account” means the separate accounts maintained for each Participant under his Pre-Tax Contributions Account and Employer Contributions Account which are not invested in Company Stock.  2.35 “Participant” means an Eligible Employee who participates in the Plan as provided in Article 3.  2.36 “Plan” means the ClubCorp Employee Stock Ownership Plan, as set forth in this document, and as hereafter amended.  2.37 “Plan Year” means the twelve (12) consecutive month period ending on December 31.  2.38 “Pre-Tax Contribution Account” means the separate account maintained for each Participant comprised of his Company Stock Account and Other Investment Account consisting of the Pre-Tax Contributions made by the Employer in accordance with Subsection 4.04(1), and including as applicable, a separate subaccount for Qualified Nonelective Contributions, as adjusted in accordance with the provisions of Article 6 of the Plan.  2.39 “Pre-Tax Contributions” means the amount each Participant has elected to contribute to the Plan pursuant to Subsection 4.04.  2.40 “QDRO Account” means that part of any Account which has been segregated from such Account for the benefit of an Alternate Payee pursuant to a Qualified Domestic Relations Order.  2.41 “Qualified Domestic Relations Order” means an order or decree which:  2.41(1) Relates to the provision of child support, alimony payments, or marital property rights to a spouse, child, or other dependent of a Participant; and  2.41(2) Is made pursuant to a state domestic relations law (including a community property law); and  2.41(3) Creates or recognizes the existence of an Alternate Payee’s right to, or assigns to an Alternate Payee the right to, receive all or a portion of the benefits payable with respect to a Participant under the Plan; and  2.41(4) Is determined by the Plan Administrator to meet all applicable requirements pursuant to the procedure established by the Plan Administrator for determining whether an order is a Qualified Domestic Relations Order.  2.42 “Qualified Nonelective Contribution” or “QNEC(s) “ shall mean a contribution (other than Pre-Tax Contributions, Matching Contributions, Discretionary Contributions, or any contribution required pursuant to Subsection 10.05), if any, (i) made by the Employer in its sole and absolute discretion for the benefit of Non-Highly Compensated Employees (and thus, satisfies the     10     requirements of Code section 401(a)(4)), (ii) which are allocable in accordance with Subsection 4.05(3)(c), and (iii) which shall be nonforfeitable and treated for all purposes as Pre-Tax Contributions (including for purposes of Section 4.09 but not for purposes of hardship withdrawals as provided in Subsection 4.10).  QNECs shall, in accordance with Subsection 4.05(3)(c) and Treasury Regulations Sections 1.401(k)-1(b)(5) and 1.401(m)-1(b)(5): (i) be allocated to the Employee’s Pre-Tax Contribution Account as of the last day of the Plan Year, (ii) not be contingent upon the Employee’s participation in the Plan or performance of services on any date subsequent to the date as of which QNECs are allocated and (iii) shall be actually paid to the Plan no later than the end of the twelve (12) month period immediately following the Plan Year to which such contribution relates; provided however, that if several plans are aggregated in accordance with Code section 410(b) and if the Plan Year of the Plan is changed to satisfy the requirement that plans have the same plan year, the QNECs for the short Plan Year created must also (iv) be treated as if they were Pre-Tax Contributions and, (v) be related to the Total Compensation that would have been received by such Employee during that short Plan Year but for such Employee’s election under Section 4.04, or (vi) be attributable to services performed by the Employee in that short Plan Year, and but for the Employee’s election to defer under Section 4.04, would have been received by the Employee within two and one-half months after the close of that short Plan Year.  2.43 “Required Beginning Date” means, in the case of the Participant who attains age seventy and one-half (701/2) prior to January 1, 1999: (i) April 1 of the calendar year following the calendar year in which the Participant attains age seventy and one half or (ii) April 1 of the calendar year following the calendar year in which the Participant retires, as the Participant so elects. With respect to all other Participants Required Beginning Date means April 1 of the calendar year following the calendar year in which the Participant retires.  2.44 “Semiannual Valuation Date” means June 30 and December 31 and such other dates as of which Company Stock is valued, as specified by the Plan Administrator.  2.45 “Termination of Employment” shall mean the termination of employment with all Employers, whether voluntarily or involuntarily, other than by reason of a Participant’s retirement after attaining his Normal Retirement Date or after sustaining Disability, or death, or transfer to a non-adopting Affiliated Company.  2.46 “Trust” means the legal entity resulting from the Trust Agreement between the Company and the Trustee who receives contributions, and holds, invests, and disburses funds to or for the benefit of Participants and their Beneficiaries. Unless the context specifically indicates otherwise, the terms “Trust, “ “Trust Agreement, “ “Trust Fund, “ and “Trustee” refer to all such trusts, trustees, trust agreements, and trust funds in the aggregate.  2.47 “Trust Agreement” means the instrument establishing the Trust, as amended from time to time.  2.48 “Trust Fund” means all assets of whatsoever kind or nature from time to time held by the Trustee pursuant to the Trust Agreement without distinction as to income and principal.    11    2.49 “Trustee” means the party or parties, individual or corporate, named in the Trust Agreement and any duly appointed additional or successor Trustee or Trustees acting thereunder.  2.50 “Vesting Year of Service” means a Plan Year, beginning with the Plan Year in which the Employee commenced employment or reemployment with any Affiliated Company, during which a Participant has completed at least one (1) Hour of Service with an Affiliated Company. For purposes of determining an Employee’s Vesting Years of Service, an Employee, upon completion of an Hour of Service for an Employer, shall receive credit for service with any club which is not an Affiliated Company but which is a club managed by the Company or a club which the Company manages or owns pursuant to a joint venture with another entity, but only for service while such club is managed or partially owned.  2.51 Wherever appropriate, words used in the Plan in the singular may mean the plural, the plural may mean the singular, and the masculine may mean the feminine.  2.52 The words “herein, “ “hereof, “ and “hereunder” refer to the Plan.  2.53 The expressions listed below have the meanings stated in the Sections or Subsections hereof respectively indicated:          “Actual Contribution Percentage” or “ACP”    Subsection 4.07(4)(a)     “Actual Deferral Percentage” or “ADP”    Subsection 4.05(4)(a)     “Aggregate Limit”    Subsection 4.05(2)     “Annual Additions”    Section 5.06(1)     “Computation Period”    Section 2.29(1)     “Current Value”    Subsection 6.01(1)     “Defined Benefit Plan”    Subsection 19.01(1)     “Defined Contribution Plan”    Subsection 5.08(2)     “Determination Date”    Subsection 19.01(3)     “Direct Rollover”    Subsection 11.07(2)(d)     “Distributee”    Subsection 11.07(2)(c)     “Eligible Employee”     Section 2.20; Subsection 4.05(4)(e); Subsection 4.07(4)(d)     “Eligible Participants”    Section 5.03    12          “Eligible Retirement Plan”    Subsection 11.07(2)(b)     “Eligible Rollover Distribution”    Subsection 11.07(2)(a)     “Employment Period”    Section 2.19     “Excess Aggregate Contributions”    Subsection 4.07(2)     “Excess Contributions”    Subsection 4.05(4)(b)     “Excess Deferrals”    Section 4.06     “Forfeiture”    Subsection 10.04(6)     “Highly Compensated Employee”     Subsection 4.05(4)(c); Subsection 4.07(4)(b)     “Key Employee”    Subsection 19.01(4)     “Key Employee Participant”    Subsection 19.01(5)     “Limitation Year”    Subsection 5.08(4)     “Limitation Year Compensation”     Subsection 5.08(5); Subsection 19.01(6)     “Named Fiduciaries”    Section 13.10     “Non-Key Employee”    Subsection 19.01(7)     “Permissive Aggregation Group”    Subsection 19.01(8)     “Permitted Purpose”    Subsection 4.10(6)     “Plan Administrator”    Section 13.01     “Prior Plan”    Section 1.01     “Qualified Consent”    Subsection 9.02(2)     “Required Aggregation Group”    Subsection 19.01(9)     “Retirement Plan”    Subsection 5.08(1)     “Securities Act”    Section 4.13    13          “Top Heavy Plan”    Subsection 19.02(1)     “Top Heavy Ratio”    Subsection 19.02(2)     “Total Compensation”     Subsection 4.05(4)(f); Subsection 4.07(4)(e)     “Valuation Date”    Subsection 19.01(10)    14    ARTICLE 3. - REQUIREMENTS FOR ELIGIBILITY AND PARTICIPATION  3.01 Eligibility. Any Eligible Employee who met the eligibility requirements under the Plan, as it existed prior to its amendment and restatement, shall be eligible to participate in the Plan as of January 1, 2001. Each other Eligible Employee shall be eligible to participate as of the Entry Date coinciding with or next following the date upon which such Eligible Employee completes six (6) months of continuous service, provided he is an Eligible Employee on such Entry Date. In the event an Eligible Employee has a Termination of Employment prior to completing six (6) months of continuous service, the Eligible Employee may participate as of the first Entry Date following completion of six (6) months of continuous service. In the event an Eligible Employee has a Termination of Employment after completing six (6) months of continuous service but prior to the Entry Date upon which such Eligible Employee would have been eligible to participate in the Plan, and such Eligible Employee is reemployed by an Employer after the Entry Date upon which the Eligible Employee would have participated in the Plan, such Eligible Employee will be eligible to participate as of the Entry Date which next follows his Date of Reemployment, provided he is an Eligible Employee on such date. In the event a Participant has a Termination of Employment and is reemployed by an Employer, he will automatically be reinstated as a Participant as of the Entry Date which next follows his Date of Reemployment, provided he is an Eligible Employee on such date. For purposes of the determination of the fulfillment of an Eligible Employee’s initial six (6) months of continuous service eligibility requirement, an Eligible Employee, upon employment by an Employer, shall receive credit for service with any club which is not an Affiliated Company but which is a club managed by the Company or a club which the Company manages or owns pursuant to a joint venture with another entity, but only for service while such club is managed or partially owned.  3.02 Employment with a Predecessor Employer. If the Plan had previously been maintained by a predecessor of an Employer, whether a corporation, partnership, sole proprietorship, or other business entity, any period of employment with such predecessor shall be treated as a period of employment with an Employer. If the Plan had not been previously maintained by a predecessor of an Employer, employment with such predecessor shall not be taken into account, except to the extent required pursuant to regulations prescribed by the Secretary of the Treasury or his delegate.  3.03 Change in Status of Eligible Employee.  3.03(1) In the event an Employee who is not an Eligible Employee becomes an Eligible Employee, such individual shall be eligible to participate in the Plan as of the next following Entry Date, provided he is an Eligible Employee on such date and he has met the other requirements for eligibility set forth in Section 3.01.  3.03(2) In the event a Participant, who ceased to be an Eligible Employee but who did not terminate his employment with any Affiliated Company, subsequently becomes an Eligible Employee again, such Eligible Employee will be reinstated as a Participant as of the date he again becomes an Eligible Employee as of the next following Entry Date, provided he is an Eligible Employee on such date.    15    3.04 Participation in the Plan. Each Eligible Employee must, in order to elect Pre-Tax Contributions and become a Participant, file an election pursuant to Section 4.04, with the Plan Administrator within the Election Period prior to the Entry Date as of which such Eligible Employee is to become a Participant. If an Eligible Employee fails to file such an election for the first Entry Date on which he is eligible to participate, he may elect to begin participation in the Plan as of any subsequent January 1 or July 1 by filing such an election during the applicable Election Period, subject to the eligibility requirements of Sections 3.01, 3.02, and 3.03. Each Eligible Employee shall be provided with such information as is required by ERISA within the time prescribed for providing such information. In addition, each Participant shall be provided with a designation of Beneficiary form which shall provide for a designation of one or more Beneficiaries to receive benefits in the event of the Participant’s death.  3.05 Military Service. Notwithstanding any provision of this Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Code section 414(u).    16    ARTICLE 4. - CONTRIBUTIONS  4.01 Employer Contributions. Subject to Section 4.07 and Sections 5.06 through 5.08, each Employer’s Contribution shall consist of (i) a Matching Contribution attributable to its Employees, (ii) a Discretionary Contribution in such amount as the Board in its sole discretion may authorize for those Participants who are employed by an Employer on the last day of the Plan Year, (iii) any contribution required pursuant to Subsection 10.05(2), and (iv) any Qualified Nonelective Contribution made to satisfy the ACP test. In no event, however, shall total Employer Contributions exceed the maximum deductible contribution under Code section 404(a), including any amount which may be deductible by the Employer under the carryover provisions of the Code. All Employer Contributions shall be made in the form of cash or shares of Company Stock, as determined in the sole discretion of the Board. Notwithstanding the preceding, Employees who are employed by Operations Company for Homestead, Inc. shall not be eligible to receive a Matching Contribution or a Discretionary Contribution under this Plan during any Plan Year in which such Employees are eligible to participate in The Homestead Retirement Plan at any time during such Plan Year.  4.02 Matching Contributions. Subject to Section 4.07 and 5.06 through 5.08, the Employer shall contribute to the Trust Fund an amount equal to twenty percent (20%) of each Participant’s Pre-Tax Contributions (to the extent not previously withdrawn) made during the calendar quarter, provided that such Participant is shown as an Employee on the payroll records of the Employer on the last day of such calendar quarter, which shall be allocated (i) if in cash, to the Other Investments Account of the Employer Contribution Account; and (ii) if in Company Stock, to the Company Stock Account of the Employer Contribution Account of the Participant whose Pre-Tax Contributions were so matched.  4.03 Date of Payment of Matching Contributions, Discretionary Contributions and Pre-Tax Contributions. Matching Contributions shall be paid to the Trust on a quarterly basis. Discretionary Contributions, if any, shall be paid to the Trust for a Plan Year on or before the last date, including any extensions thereof, for filing its federal income tax return for its fiscal year ending with, or after the last day of such Plan Year and shall be deemed made as of the last day of the Plan Year for which they are made. An Employer shall make all Pre-Tax Contributions as provided in Section 4.04 hereof to the Trust Fund as soon as administratively practical following the close of the payroll period for which the Participant’s elections are applicable.  4.04 Pre-Tax Contributions; Change of Election.  4.04(1) Subject to the provisions of Section 4.05, a Participant may elect:  (a) To receive his entire Compensation in cash; or  (b) To defer a portion of his Compensation, as a Pre-Tax Contribution, in specified whole percentages, that is not less than one percent (1%) or more than six percent (6%) of his Compensation for each payroll period. The Pre-Tax Contributions shall not exceed $10,000 (ten thousand dollars) (or such greater amount allowed pursuant to cost of living adjustments prescribed by the Secretary of the Treasury) during a calendar year. The amount deferred as Pre-Tax Contributions shall be allocated: (i) if in cash, to the Other Investments Account of the Pre-Tax     17     Contribution Account; and (ii) if in Company Stock, to the Company Stock Account of the Pre-Tax Contribution Account. A Participant’s Pre-Tax Contributions shall, at all times and for all purposes be fully vested and nonforfeitable.  No Participant shall be permitted to have Pre-Tax Contributions made under this Plan, or any other qualified plan maintained by the Employer during any taxable year, in excess of the dollar limitation contained in section 402(g) of the Code in effect for such taxable year, except to the extent permitted under Section 414(v) of the Code, if applicable.  (c) Any amount a Participant elects to defer under this Subsection 4.04(1) shall be contributed by his Employer to the Trust as a Pre-Tax Contribution and allocated to the Pre-Tax Contribution Account. The dollar limitation in this Section shall be decreased by any salary deferrals under Code section 401(k) made by a Participant under any related plan, to the extent that any Excess Deferrals are allocated to this Plan pursuant to Section 4.06.  (d) Notwithstanding the preceding, in no event may a Participant defer an amount as a Pre-Tax Contribution which is in excess of the actual amount payable to such Participant from the Employer for such payroll period as is entered on the Participant’s paycheck for such payroll period.  4.04(2) Each Employee who becomes eligible or who at a given time is about to become eligible to participate in the Plan shall elect at such time and in such form as the Plan Administrator shall in its sole and absolute discretion determine, to defer the receipt of a portion of his Compensation or to receive his entire Compensation in cash, in accordance with Subsection 4.04(1). The Plan Administrator shall establish and communicate to Employees uniform and nondiscriminatory procedures for the election of percentage rates of Pre-Tax Contributions, including procedures regarding the effective date of such election, and may change said procedures at such times and in such manner as the Plan Administrator may determine to be necessary or desirable. Any such change in procedures shall be communicated to Employees.  A Participant who has previously elected to defer the receipt of a portion of his Compensation pursuant to this Section 4.04 may at any time elect, in such form as prescribed by the Plan Administrator, to change the amount of the deferral of his Compensation or to begin receiving his entire Compensation in cash, and such election shall not become effective until after received by the Plan Administrator in the form prescribed by the Plan Administrator.  4.05 Limitation on Pre-Tax Contributions for Highly Compensated Employees. Each Plan Year, the Plan shall satisfy the nondiscrimination tests in Code section 401(k)(3).  4.05(1) Notwithstanding the provisions of Section 4.04, the Actual Deferral Percentage (or “ADP”) for the Highly Compensated Employees with respect to any Plan Year shall not exceed the greater of (a) or (b):  (a) The Actual Deferral Percentage for the Non-Highly Compensated Employees multiplied by 1.25, or  (b) The Actual Deferral Percentage for the Non-Highly Compensated Employees multiplied by 2.0; provided, however, that the Actual Deferral Percentage for the Highly Compensated Employees may not exceed the Actual Deferral Percentage for the Non-Highly Compensated Employees by more than two (2) percentage points.    18    4.05(2) [Reserved]  4.05(3) If at any time during a Plan Year, the Actual Deferral Percentage for the Highly Compensated Employees exceeds or is reasonably expected by the Plan Administrator to exceed the amounts allowed under Subsections 4.05(1), the Plan Administrator, in its sole and absolute discretion, shall, as often as it elects, do one or more of the following, provided, however, that if this Plan is aggregated with one or more plans in accordance with Code sections 401(a)(4), 410(b) or 401(k), such Highly Compensated Employee shall have the right (in accordance with procedures established by the Plan Administrator) to direct the Plan Administrator with respect to whether correction of such excess (or expected excess) will occur under this Subsection 4.05(3) or under the applicable provisions of the other aggregated plans:  (a) Prospectively and in the same proportion reduce the amount of Compensation to be deferred pursuant to Subsections 4.04(1) by each Highly Compensated Employee who has elected pursuant to Subsections 4.04(1) to defer a portion of his Compensation until the Actual Deferral Percentage for Highly Compensated Employees equals (by rounding up) for the Plan Year the greater of (a) or (b) of Subsection 4.05(1).  (b) (i) Refund the portion of each Highly Compensated Employee’s Pre-Tax Contribution that constitutes a portion of the Excess Contribution for the Plan Year, plus earnings (or less losses) on such amount for the Plan Year until the Actual Deferral Percentage for the Highly Compensated Employees equals (by rounding up) the greater of (a) or (b) of Subsection 4.05(1) with all refunds to be charged: (A) first against the Other Investments Account of the Participant’s Pre-Tax Contribution Account for the calendar year that includes the first day of the Plan Year; (B) secondly against the Company Stock Account of the Participant’s Pre-Tax Contribution Account for the calendar year that includes the first day of the Plan Year, and then, to the extent necessary; (C) thirdly against the Other Investment Account of the Participant’s Pre-Tax Contribution Account for the calendar year that includes the last day of the Plan Year; and (D) then finally against the Company Stock Account of the Participant’s Pre-Tax Contribution Account for the calendar year that includes the last day of the Plan Year. All such refunds shall be distributed by the Trustee to the Employee within two and one-half months after the close of the Plan Year in which the Excess Contribution arose, if administratively possible, and within twelve (12) months after the close of such Plan Year at the latest.  (ii) Excess Contributions are calculated by determining the dollar value of the aggregate of the reductions in the Actual Deferral Ratios for each Highly Compensated Employee that would otherwise be necessary to meet the limitations of Subsection 4.05(1). In calculating these Excess Contributions, the following leveling method shall be used. The Actual Deferral Ratio of the Highly Compensated Employee with the highest Actual Deferral Ratio is reduced to the extent required to (i) enable the Plan to satisfy the limitations of Subsection 4.05(1), or (ii) cause such Highly Compensated Employee’s Actual Deferral Ratio to equal the Actual Deferral Ratio of the Highly Compensated Employee with the next highest Actual Deferral Ratio, whichever occurs first. This process must be repeated (taking into consideration previous reductions under this method) until the limitations of Subsection 4.05(1) is met. The dollar value of the reductions in the Actual Deferral Ratio for each Highly Compensated Employee (rounded to the nearest one cent ($.01)) are then calculated and added together to arrive at the Excess Contributions.    19    (iii) The amount of Excess Contributions to be distributed to individual Highly Compensated Employees is determined by applying Excess Contributions to reduce the dollar amount of Pre-Tax Contributions elected by Highly Compensated Employees. In distributing Excess Contributions, the following leveling method shall be used. The Pre-Tax Contributions of the Highly Compensated Employee with the highest dollar amount of Pre-Tax Contributions are reduced to the extent required (i) for the reduction, when added to all previous reductions under this method, to equal the Excess Contributions, or (ii) to cause the dollar value of such Highly Compensated Employee’s Pre-Tax Contributions to equal the dollar value of the Highly Compensated Employee with the next highest dollar value of Pre-Tax Contributions, which ever occurs first. This process must be repeated (taking into consideration previous reductions under this method) until the total of all reductions equals the Excess Contribution. The amount of Excess Contributions to be distributed to each affected Highly Compensated Employee is equal to the Pre-Tax Contributions made on behalf of such Employee prior to reduction of the Excess Contributions under the above method, less the Pre-Tax Contributions on behalf of such Employee after reductions made under the above method.”  (iv) The provisions of this Subsection shall be applied after the provisions of Section 4.06 are applied and the amount of any Excess Contributions refunded under this Subsection shall be reduced by Excess Deferrals, if any, attributable to such Plan Year previously distributed to the Employee. Any distribution made pursuant to this Subsection 4.05(3)(b)(i) may be made notwithstanding any other provision of this Plan.  (v) Notwithstanding any Plan provision to the contrary, in no event shall Matching Contributions remain allocated to a Highly Compensated Employee’s account and such amounts shall be treated as forfeitures (in the same manner as provided in Subsection 4.07(2)(c)(ii)) if the Pre-Tax Contributions which were matched by such Matching Contributions are refunded as Excess Contributions under this Subsection 4.05(3)(b)(i).  (vi) The earnings or losses allocable to Excess Contributions for the applicable Plan Year shall be determined by multiplying the total income (or loss) allocable the Pre-Tax Contribution Account for the applicable Plan Year by a fraction, the numerator of which is the Excess Contribution on behalf of the Participant for the applicable Plan Year and the denominator of which is the balance of the Participant’s Pre-Tax Contribution Account on the last day of the applicable Plan Year (prior to any refund or redistribution of Excess Contributions), reduced by the income or gain (or increased by the loss) allocable to such total amount for the Plan Year.  (vii) The income allocable to Excess Contributions, for purposes of Subsections 4.05(3)(b)(i) and 4.05(3)(b)(ii), shall include all earnings and appreciation, including such items as interest, dividends, rent, royalties, gains from the sale of property, appreciation in the value of stock, bonds, annuity and life insurance contracts, and other property, without regard to whether such appreciation has been realized.  (viii) No income allocable to Excess Contributions for the period between the end of the Plan Year and the date of the distribution shall be refunded.    20    (c) In addition to or in lieu of the above procedures to conform Pre-Tax Contributions to the limitations of Subsection 4.05(1), the Employer may make a QNEC on behalf of any Non-Highly Compensated Employee. In the event a QNEC is to be allocated to a Participant under either this Subsection 4.05(3)(c) or Subsection 4.07(2)(d) such allocation shall equal the maximum amount which can be allocated to that Participant without causing the total amount allocated to the Participant under the Plan to exceed the limitation of Section 5.06, provided that QNECs shall be allocated first to the account of Non-Highly Compensated Employees who have the lowest Compensation for the Plan Year, then as the Actual Deferral Ratios (or, if applicable, the Actual Contribution Ratios) of those Participants increase, allocations shall be made to the accounts of Non-Highly Compensated Employees with the next lowest Compensation and so on until the entire QNEC has been allocated.  4.05(4) For purposes of this Section 4.05:  (a) “Actual Deferral Percentage” (or “ADP”) shall mean for Eligible Employees the average (arithmetic mean) of the Actual Deferral Ratios (calculated separately for each Eligible Employee to the nearest one-hundredth of one percent), which equals  (i) the sum of the Pre-Tax Contributions actually contributed to the Trust on behalf of such Employee and allocated to his Pre-Tax Contribution Account for such Plan Year, plus  (A) the Qualified Nonelective Contributions, if any, actually contributed to the Trust on behalf of such Employee and allocated to his Pre-Tax Contribution Account for such Plan Year, and  (B) the Matching Contributions (other than Qualified Nonelective Contributions), if any, actually contributed to the Trust on behalf of such Employee and allocated to his Pre-Tax Contribution Account for such Plan Year that qualify for aggregation under Code section 401(k)(3)(D)(ii) and are designated by the Plan Administrator as includible in this computation for this Plan Year, divided by  (ii) the Total Compensation received by the Employee during the Plan Year, such average of ratios being multiplied by one hundred (100).  (iii) Any Pre-Tax Contributions taken into account for purposes of the Actual Deferral Percentage shall: (i) (but for the election which such Employee made in accordance with Section 3.04) relate to Total Compensation that would have been received by such Employee during the Plan Year; or (ii) be attributable to services performed by the Employee in the Plan Year and (but for the election which such Employee made in accordance with Section 3.04) would have been received by the Employee within two and one-half months after the end of the Plan Year; and (iii) be allocated to the Employee’s Pre-Tax Contribution Account as of a date within the Plan Year; and (iv) not be contingent upon the Employee’s participation in the Plan or performance of services on any date subsequent to the date as of which such contributions are allocated; and (v) shall be actually paid to the Plan no later than the end of the twelve (12) month period immediately following the Plan Year to which such contribution relates.    21    (iv) To the extent that the Plan Administrator elects, pursuant to the above paragraph, to take Matching Contributions (other than Qualified Nonelective Contributions) for such Plan Year, that meet the requirements of the applicable Regulations, into account in computing the Actual Deferral Percentage, the Actual Contribution Percentage tests under Section 4.07 must still be completed and satisfied separately, and in doing so the Employer shall disregard the Matching Contributions used in computing the Actual Deferral Percentage for such Plan Year. Any Matching Contributions taken into account for purposes of determining the Actual Deferral Percentage shall be: (i) allocated only to the accounts of Participants who are not Non-Highly Compensated Employees; (ii) allocated to such Employees’ Pre-Tax Contribution Account (and at the discretion of the Plan Administrator to the subaccount for Qualified Nonelective Contributions); and (iii) shall be nonforfeitable and treated for all purposes as Pre-Tax Contributions, including for purposes of the directly preceding paragraph of this Subsection 4.05(4)(a) and Section 4.09 but such amounts will be prohibited from being withdrawn as hardship withdrawals as provided in Subsection 4.10.  (v) For purposes of this Section, the ratio calculated for any Eligible Employee who is a Highly Compensated Employee for the Plan Year and who is eligible to have Pre-Tax Contributions allocated to his account under two or more plans or arrangements described in Code section 401(k) that are maintained by the Employer shall be determined as if all such contributions were made under a single arrangement. Further, in the event that this Plan satisfies the requirements of Code sections 401(a)(4) and 410(b) only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of Code sections 401(a)(4) and 410(b) only if aggregated with this Plan, the Actual Deferral Percentage shall be determined by calculating the ratio for each Eligible Employee as if all such plans were a single plan. If the Plan is permissively aggregated with another plan in order to comply with the limitations of Subsection 4.05(1), such aggregated plans must also meet the requirements of Code sections 401(a)(4) and 410(b) as a single plan.  (b) “Excess Contributions” shall mean, with respect to any Plan Year, the excess of (i) the aggregate amount of contributions, if any, included under Subsection 4.05(4)(a) in the Actual Deferral Percentage computation for the Plan Year that were actually paid over to the Trust on behalf of Highly Compensated Employees for such Plan Year, over (ii) the maximum amount of such Pre-Tax Contributions permitted under the limitations of Subsections 4.05(1).  (c) “Highly Compensated Employee” shall mean any Eligible Employee who is a highly compensated employee as defined in Code section 414(q) and the regulations thereunder using the calendar year election of Treasury Regulation Section 1.414(q)-1T, Q&A 14(b). Generally, a Highly Compensated Employee is any Employee who:  (i) was at any time a ‘five percent owner,’ as defined in Section 416(i)(1) of the Code, during the Plan Year for which the definition is being applied or during the preceding Plan Year with respect to an Employer;  (ii) for the preceding Plan Year -  (A) received Compensation from the Employer in excess of Eighty-Five Thousand Dollars ($85,000.00) as indexed at the same time and in the same manner as under Code section 415(d), and;    22    (B) if the Employer elects, was in the group of Employees of an Employer and all Participating Companies consisting of the top twenty percent (20%) of the Employees when ranked on the basis of Compensation paid during the Plan Year. For purposes of determining the number of Employees in the top-paid group, Employees who have not completed six (6) months of Service, normally work less than seventeen and one-half (172) hours per week, normally work during six (6) or less months per year, have not attained the age of twenty-one (21), are nonresident aliens with no earned income from sources within the United States (within the meaning of Section 861(a)(3) of the Code), or are included in a unit of employees covered by a collective bargaining agreement (except to the extent provided in regulations), shall not be included.  (d) “Non-Highly Compensated Employee” means any Eligible Employee who is not a Highly Compensated Employee.  (e) “Eligible Employee” shall mean for or during a Plan Year each Employee who is eligible to become a Participant, including those Employees who are eligible to but fail to file the election required by Section 3.04; provided, however, that those Employees of ClubCorp International Resource Company who are nonresident aliens who receive no earned income (within the meaning of Code section 911(d)(2)) which is U.S. source income (within the meaning of Code section 861(a)(3)) shall not be treated as Eligible Employees for purposes of this Section 4.05.  (f) “Total Compensation” means any payments received by an Eligible Employee for the Plan Year in question from an Affiliated Company which meet the definition of Total Compensation chosen by the Plan Administrator for that Plan Year. Any such definition chosen by the Plan Administrator shall satisfy the requirements of Code section 414(s) and all related Treasury Regulations. In the event an Employee begins, resumes, or ceases to be an Eligible Employee during a Plan Year, the amount of the Employee’s Total Compensation for the entire Plan Year shall be taken into account for purposes of this Section 4.05(4)(f). The Total Compensation of each Participant taken into account in determining allocations for any Plan Year shall not exceed $200,000, as adjusted for cost-of-living increases in accordance with section 401(a)(17)(B) of the Code. “Total Compensation” means Compensation during the Plan Year or such other consecutive 12-month period over which Compensation is otherwise determined under the Plan (the determination period). The cost-of-living adjustment in effect for a calendar year applies to Total Compensation for the determination period that begins with or within such calendar year.  4.06 Distribution of Excess Deferrals. If a Participant is required to include in his gross income for a calendar year elective deferrals (as defined in Code section 402(g)(3)) which exceeded Twelve Thousand Dollars ($12,000) (or such greater amount as determined by the Secretary of the Treasury pursuant to cost-of-living increases) for such year, such amounts shall be referred to as “Excess Deferrals” and shall be distributed to the Participant. The Plan Administrator shall distribute such Excess Deferrals, adjusted for any income or losses allocable to such amount (determined in accordance with the principles of Subsection 4.05(3)(b)), for the Plan Year in question not later than the time determined under Subsection 4.05(3)(b), provided, however, that the amount of Excess Deferrals to be distributed shall be reduced by Excess Contributions previously distributed in accordance with Subsection 4.05(3)(b) to the Employee from the Plan which are attributable to such Plan Year. Any distribution made pursuant to this Section may be made notwithstanding any other provision of this Plan.    23    4.07 Limitation on Matching Contributions. Each Plan Year, the Plan shall satisfy the nondiscrimination tests in Code section 401(m).  4.07(1) Notwithstanding any other provision of this Plan, the “Actual Contribution Percentage” (or “ACP”) of Matching Contributions made to the Plan for Highly Compensated Employees during the Plan Year shall not exceed the greater of the limitations indicated below:  (a) One hundred twenty-five percent (125%) of the ACP for all Non-Highly Compensated Employees; or  (b) The lesser of: (i) the sum of the ACP for all Non-Highly Compensated Employees plus two percent (2%); or (ii) two hundred percent (200%) of the ACP for all Non-Highly Compensated Employees.  4.07(2) In the event that following the end of the Plan Year, it is determined by the Plan Administrator that the Matching Contributions allocated to Highly Compensated Employees exceed the limitations of Subsection 4.07(1), then the amount in excess of such limitation (“Excess Aggregate Contributions”) (and income thereon) shall be corrected in accordance with the following rules.  (a) (i) Distribute the Excess Aggregate Contributions, as adjusted for allowable income, during the next Plan Year.  (ii) Excess Contributions are calculated by determining the dollar value of the aggregate of the reductions in the Actual Contribution Ratios for each Highly Compensated Employee that would otherwise be necessary to meet the limitations of Subsections 4.07(1) and 4.07(2). In calculating these Excess Aggregate Contributions, the following leveling method shall be used. The Actual Contribution Ratio of the Highly Compensated Employee with the highest Actual Contribution Ratio is reduced to the extent required to (i) enable the Plan to satisfy the limitations of Subsections 4.07(1) and 4.07(2), or (ii) cause such Highly Compensated Employee’s Actual Contribution Ratio to equal the Actual Contribution Ratio of the Highly Compensated Employee with the next highest Actual Contribution Ratio, whichever occurs first. This process must be repeated (taking into consideration previous reductions under this method) until the limitations of Subsection 4.05(1) is met. The dollar value of the reductions in the Actual Contribution Ratio for each Highly Compensated Employee (rounded to the nearest one cent ($.01)) are then calculated and added together to arrive at the Excess Aggregate Contributions.  (iii) The amount of Excess Aggregate Contributions to be distributed to individual Highly Compensated Employees is determined by applying Excess Aggregate Contributions to reduce the dollar amount of Matching Contributions made on behalf of such Highly Compensated Employees. In distributing Excess Matching Contributions, the following leveling method shall be used. The Matching Contributions of the Highly Compensated Employee with the highest dollar amount of Matching Contributions are reduced to the extent required (i) for the reduction, when added to all previous reductions under this method, to equal the Excess Aggregate Contributions, or (ii) to cause the dollar value of such Highly Compensated Employee’s Matching Contributions to equal the dollar value of the Highly Compensated Employee with the next highest dollar value of Matching Contributions, which ever occurs first. This process must be repeated (taking into consideration previous reductions under this method) until the total of all     24     reductions equals the Excess Aggregate Contribution. The amount of Excess Aggregate Contributions to be distributed to each affected Highly Compensated Employee is equal to the Matching Contributions made on behalf of such Employee prior to reduction of the Excess Aggregate Contributions under the above method, less the Matching Contributions on behalf of such Employee after reductions made under the above method.  (b) In addition to or in lieu of the above procedures to conform Matching Contributions to the limitations of Subsection 4.07(1), the Employer may make a QNEC on behalf of any Non-Highly Compensated Employee to the extent necessary to insure the limitations of Subsection 4.07(1) are met. Such QNECs shall be included in the calculations under Subsection 4.07(1) only if the requirements of Treasury Regulation Section 1.401(m)-l(b)(5) (or any successor thereto) are met. In addition, the Plan Administrator may designate that all or part of the Pre-Tax Contributions shall be included in the calculations under Subsection 4.07(1) (any such amounts shall not be included in the calculations under Subsection 4.05(1)) provided such use complies with the requirements of Treasury Regulation Section 1.401(m)-l(b)(2) (or any successor thereto).”  4.07(3) In determining the amount of income allocable to Excess Aggregate Contributions which are being distributed or forfeited, the following rules shall apply:  (a) The income allocable to Excess Aggregate Contributions for the Plan Year in which the contributions are made is the income for the Plan Year with respect to the Highly Compensated Employee’s Matching Contributions multiplied by a fraction, the numerator of which is the amount of Excess Aggregate Contributions made on behalf of the Highly Compensated Employee for the Plan Year and the denominator of which is the balance of the Participant’s Matching Contributions as of the end of the Plan Year before adjustment of his Employer Contribution Account in accordance with the provisions of Article 6. For purposes of this Subsection 4.07(3), the income of the Plan shall mean all earnings, gains and losses computed in accordance with the provisions of Article 6.  (b) No income allocable to Excess Aggregate Contributions for the period between the end of the Plan Year and the date of the distribution shall be refunded.  4.07(4) For purposes of this Section 4.07:  (a) “Actual Contribution Percentage” (or “ACP”) shall mean for Eligible Employees the average (arithmetic mean) of the Actual Contribution Ratios (calculated separately for each Eligible Employee to the nearest one-hundredth of one percent), which equals:  (i) the sum of Matching Contributions actually contributed to the Trust on behalf of such Employee and allocated to his Employer Contribution Account for the Plan Year, plus  (ii) the Qualified Nonelective Contributions actually contributed to the Trust on behalf of such Employee and allocated to his Pre-Tax Contribution Account for the Plan Year, plus  (iii) the Pre-Tax Contributions actually contributed to the Trust on behalf of such Employee and allocated to his Pre-Tax Contribution Account for the Plan Year, that qualify for aggregation under Code section 401(m)(3) and are designated by the Plan Administrator as includible in this computation for this Plan Year, divided by    25    (iv) the Total Compensation, as defined in Subsection 4.05(4)(f), received by the Employee during the Plan Year, such average of ratios being multiplied by one hundred (100).  (v) To the extent that the Plan Administrator elects, pursuant to the above paragraph, to take Pre-Tax Contributions (and other contributions) listed in Subsection 4.05(4)(a) into account in computing the Actual Contribution Percentage for such Plan Year, the Actual Deferral Percentage test under Section 4.05 must be satisfied separately, disregarding Pre-Tax Contributions (and other contributions) listed in Subsection 4.05(4)(a) but used in computing the Actual Contribution Percentage for such Plan Year.  (vi) In calculating ACP, all Pre-Tax Contributions taken into account for purposes of determining the Actual Contribution Percentage shall: (i) (but for the election which such Employee made in accordance with Section 3.04) relate to Total Compensation that would have been received by such Employee during the Plan Year; or (ii) be attributable to services performed by the Employee in the Plan Year (but for the election which such Employee made in accordance with Section 3.04) and would have been received by the Employee within two and one-half months after the end of the Plan Year; and (iii) be allocated to the Employee’s Pre-Tax Contribution Account (and at the discretion of the Plan Administrator to the subaccount for Qualified Nonelective Contributions) as of a date within the Plan Year; and (iv) not be contingent upon the Employee’s participation in the Plan or performance of services on any date subsequent to the date as of which such contributions are allocated; and (v) shall be actually paid to the Plan no later than the end of the twelve (12) month period immediately following the Plan Year to which such contribution relates; and (vi) shall be considered for purposes of the ACP with respect to amounts allocated only to the Pre-Tax Contribution Accounts of Non-Highly Compensated Employees.  (vii) In calculating ACP, a Matching Contribution shall be taken into account for a Plan Year only if such Matching Contribution: (i) is made on account of the Employee’s Pre-Tax Contribution for the Plan Year; (ii) is allocated to the Employee as of a date during such Plan Year; and (iii) is paid to the Trust not later than the last day of the twelfth (12th) month following the close of such Plan Year.  (viii) In calculating ACP, all employee contributions and employer matching contributions (as defined in Code section 401(m)(4)) of any Highly Compensated Employee who participates in more than one plan maintained by an Affiliated Company shall be aggregated for purposes of determining such percentage.  (ix) In calculating ACP, all employee contributions and employer matching contributions (as defined in Code section 401(m)(4)) to any plan required to be aggregated with the Plan for purposes of Code section 401(a)(4) or 410(b) shall be treated as if made under the Plan. If the Plan is permissively aggregated with another plan in order to comply with the limitations of Subsection 4.07(1), such aggregated plans must also meet the requirements of Code sections 401(a)(4) and 410(b) as a single plan.    26    (b) “Highly Compensated Employee” shall mean a Highly Compensated Employee as defined in Subsection 4.05(4)(c).  (c) “Non-Highly Compensated Employee” shall mean a Non-Highly Compensated Employee as defined in Subsection 4.05(4)(d).  (d) “Eligible Employee” shall mean an Eligible Employee as defined in Subsection 4.05(4)(e).  (e) “Total Compensation” shall mean compensation as defined in Subsection 4.05(4)(f).  4.08 General Withdrawal from After-Tax Contribution Account. Upon application by the Participant received by the Plan Administrator, a Participant may, in accordance with Section 4.11, withdraw all or a portion of the value of such Participant’s After-Tax Contribution Account; provided, however, that: (i) all partial withdrawals must be for a minimum of Five Hundred Dollars ($500); and (ii) all partial withdrawals over Five Hundred Dollars ($500) must be made in Two Hundred Fifty Dollar ($250) increments. Withdrawals under this Section shall be valued and the amounts of the withdrawal shall be subtracted from the Participant’s After-Tax Contribution Account as of the Allocation Date coincident with or next following the date such request for withdrawal is received by the Plan Administrator. The actual payment of the amount to be so withdrawn shall occur as soon as administratively feasible on or after such date.  4.09 General Withdrawal of Pre-Tax Contributions and Distribution Restrictions.  4.09(1) Notwithstanding any Plan provisions to the contrary, and except as provided in Section 4.10 amounts held in a Participant’s Pre-Tax Contribution Account are not distributable prior to the earliest of:  (i) his separation from service (as defined in Code section 401(k) and the Treasury Regulations thereunder) pursuant to Article 10;  (ii) his Disability pursuant to Article 8;  (iii) his Death pursuant to Article 9;  (iv) his attainment of age 592 pursuant to Subsection 4.09(2);  (v) the termination of the Plan; provided, however, that a distribution is allowable under this provision only if neither the Employer nor another company in an Affiliated Group with the Employer maintains a successor plan (as defined in Treasury Regulations Section 1.401(k)-1(d)(3)) other than an employee stock ownership plan on the date of distribution;  (vi) the disposition, to a corporation that is not in an Affiliated Group with the Employer, of substantially all (at least eighty-five percent (85%)) of the assets (within the meaning of Code section 409(d)(2)) used by the Employer in a trade or business of the Employer, but only if the Participant continues employment with the transferee corporation, the Employer continues to maintain the Plan, and the distribution is in connection with the disposition that causes the Participant’s employment transfer or as determined by the Plan Administrator as permitted by Revenue Procedure 2000-27; or    27    (vii) the disposition, to an entity or individual that is not in an Affiliated Group with the Employer, of the Employer’s interest in a subsidiary (within the meaning of Code section 409(d)(3)) in which the Participant is employed, but only if the Participant continues employment with the subsidiary, the Employer continues to maintain the Plan, and the distribution is in connection with the disposition that causes the Participant’s employment transfer.  A distribution may be made under (v), (vi), or (vii) of Subsection 4.09(1) only if it constitutes a total distribution of the sum of (i) the Participant’s balances in all of his Accounts and (ii) his account balances under any other profit sharing plan of the Employer or of a company in an Affiliated Group with the Employer.  4.09(2) A Participant who has attained age 59-1/2 may withdraw all or any portion of the balance of his previously unwithdrawn Pre-Tax Contributions as of the Allocation Date coincident with or next following the date such request for withdrawal is received by the Plan Administrator. The actual payment of the amount to be so withdrawn shall occur as soon as administratively feasible on or after such date. Notwithstanding that the Participant has elected to receive an in-service withdrawal under this paragraph, the Participant shall continue to be eligible to participate in the Plan on the same basis as prior to the withdrawal.  If, at any time, a Participant withdraws less than the entire amount which is available for his withdrawal under this Subsection 4.09(2) at such time from his Pre-Tax Contribution Account, then such Participant must withdraw a minimum amount equal to Five Hundred Dollars ($500.00).  4.10 Hardship Withdrawals from After-Tax Contribution Account and Pre-Tax Contribution Account.  4.10(1) Upon application by a Participant, the Plan Administrator may, in accordance with the provisions of this Section and Section 4.11 permit such Participant to withdraw a portion of the value of such Participant’s After-Tax Contribution Account or Pre-Tax Contribution Account, pursuant to the following provision. Of the following provisions, all but Subsections 4.10(2) and 4.10(6) shall apply to withdrawals of After-Tax Contributions and all but Subsection 4.10(7) shall apply to withdrawals of Pre-Tax Contributions. Notwithstanding the preceding, a Participant shall in any case be precluded from making a hardship withdrawal of any amount in his Pre-Tax Contribution Account attributable to Qualified Nonelective Contributions, Matching Contributions, or Discretionary Contributions.  4.10(2) No withdrawal may be made for any purpose other than a Permitted Purpose, as defined in Subsection 4.10(6).  4.10(3) Application for withdrawal must be made in such form as prescribed by the Plan Administrator, and must set out in detail the circumstances establishing that the proposed withdrawal is for a Permitted Purpose.  4.10(4) Before the Plan Administrator will permit a Participant to make a hardship withdrawal pursuant to this Section, the Participant must submit representation that his financial     28     need cannot be relieved: (i) through reimbursement or compensation by insurance or otherwise; (ii) by reasonable liquidation of the Participant’s assets, to the extent such liquidation would not itself cause an immediate and heavy financial need; (iii) by cessation of Pre-Tax Contributions under the Plan; (iv) by other distributions or nontaxable (at the time of the loan) loans from plans maintained by the Employer or by any other employer; or (v) by borrowing from commercial sources on reasonable commercial terms.  4.10(5) The Plan Administrator’s determination of whether the application meets the requirements of this Section shall be final and conclusive, and in making such determination, the Plan Administrator shall follow uniform and nondiscriminatory rules.  4.10(6) The expression “Permitted Purpose,” as used in this Section, means a withdrawal which is necessary in light of immediate and heavy financial need of the Participant which is: (i) for payment of medical expenses described in Code section 213 of the Participant, the Participant’s spouse, dependents (as defined in Code section 152) or parents as necessary for such persons to obtain medical care described in Code section 213; (ii) for purchase of a principal residence of the Participant; (iii) for payment of tuition and related educational fees for the next twelve (12) months of post-secondary education for the Participant or such Participant’s spouse, children or dependents; (iv) needed to prevent eviction of the Participant from his principal residence or foreclosure on the mortgage of the Participant’s principal residence; (v) for payment of funeral expenses for the Participant’s spouse, dependents or parents; or (vi) needed to prevent the enforcement of state or federal tax liens. Such withdrawal shall not be permitted unless the Plan Administrator determines the Participant has obtained all distributions (other than hardship distributions) and all nontaxable loans currently available under all plans maintained by any Affiliated Company, and in no event will such payment exceed the amount required to meet such financial need.  4.10(7) Hardship withdrawal payments under Subsection 4.10(1) shall not exceed eighty percent (80%) of the balance in the Participant’s After-Tax Contribution Account as of the most currently available Allocation Date and shall be paid as soon as practicable following receipt by the Plan Administrator of the application for withdrawal and shall be subtracted from the Participant’s After-Tax Contribution Account as of the date on which the distribution occurs, prior to allocation of earnings, losses, appreciation and depreciation since the last Allocation Date.  4.10(8) Hardship withdrawal payments under Subsection 4.10(1) shall not exceed the excess of: (i) the Participant’s actual Pre-Tax Contributions; over (ii) his prior withdrawals under Subsection 4.10(1) as of the most currently available Allocation Date and shall be paid as soon as practicable following receipt by the Plan Administrator of the application for withdrawal and shall be subtracted from the Participant’s Pre-Tax Contributions as of the first day of the calendar quarter in which the distribution occurs, prior to allocation of earnings, losses, appreciation and depreciation since the last Allocation Date.  4.11 Procedure for Withdrawal.  4.11(1) All withdrawals shall be subject to the Plan Administrator’s determination that the requirements for withdrawal are satisfied after receipt of a request for withdrawal on such forms as the Plan Administrator shall prescribe. If the Plan Administrator is satisfied that the application meets the requirements of Sections 4.08, 4.09 or 4.10, the application shall be granted.    29    4.11(2) When an application for withdrawal is granted under the provisions of this Section, the Plan Administrator shall give such directions to the Trustee as appropriate to effectuate the distribution in accordance with the terms hereof of the interest being withdrawn.  4.12 Discretionary Contributions. Discretionary Contributions, if any, for each Plan Year shall be in such form (i.e. cash, or Company Stock) and such amount as the Board, in its sole discretion, may direct; provided however, that the Discretionary Contributions shall not be less than the amount equal to the product of: (a) the amount required to fully amortize any outstanding Exempt Loan; minus (b) the amount already contributed by the Employer as Matching Contributions pursuant to Section 4.02. However, in no event will the total of Matching Contributions and Discretionary Contributions exceed the maximum amount deductible from the Employer’s income for such taxable year under Sections 404(a)(3)(A) and 404(a)(9) of the Code, including any amounts carried over under Section 404 of the Code. Discretionary Contributions shall: (i) if made in cash, be allocated to the Other Investments Accounts of Participants’ Employer Contribution Accounts; and (ii) if made in Company Stock, be allocated to the Company Stock Accounts of Participants’ Employer Contribution Accounts. Discretionary Contributions shall be allocated as of the last day of the Plan Year among all Participants who are employed by an Employer on the last day of such Plan Year.  If a Participant who is an Eligible Employee ceases to be an Eligible Employee or is transferred from an Employer to a non-adopting Affiliated Company, he shall not participate in the allocation of Discretionary Contributions for the Plan Year in which the cessation or transfer took place. If an Employee transfers to an adopting Employer, such Employee shall become an Eligible Employee and eligible to receive an allocation pursuant to the terms of this Section 4.12.  4.13 Securities Law Limitations on Contributions. The Plan Administrator may, in a nondiscriminatory manner determined in its sole discretion, reduce, suspend, or refund contributions, as necessary to ensure that the offer and sale of interests in the Plan and the offer and sale of Company Stock in connection with the Plan comply with all requirements under the Securities Act of 1933, as amended (the “Securities Act”), and any other applicable federal or state securities laws.    30    ARTICLE 5. - ALLOCATION TO PARTICIPANTS’ ACCOUNTS  5.01 Trust Accounts. The Plan Administrator shall create and maintain adequate records to reflect all transactions of the Trust and to disclose the interest in the Trust of each Participant, former Participant, Beneficiary, or Alternate Payee who has an undistributed interest in the Fund.  5.01(1) Individual Accounts. Where appropriate, the Plan Administrator shall establish and maintain for each Participant a Pre-Tax Contribution Account, an Employer Contribution Account, an After-Tax Contribution Account and an Employer Divestiture Account which Accounts are collectively referred to herein as an Account.  (a) Pre-Tax Contribution Account. Each Participant’s Pre-Tax Contribution Account shall be further subdivided into the following two Accounts:  (i) Company Stock Account. A Company Stock Account shall be established under each Participant’s Pre-Tax Contribution Account and shall be credited with all Pre-Tax Contributions made by the Participant which are invested in Company Stock.  (ii) Other Investments Account. An Other Investments Account shall be established under each Participant’s Pre-Tax Contribution Account and shall be credited with all Pre-Tax Contributions made by the Participant which are not invested in Company Stock and if applicable, Qualified Nonelective Contributions made on the Participant’s behalf.  (b) Employer Contribution Accounts. Each Participant’s Employer Contribution Account shall be further subdivided into the following two Accounts:  (i) Company Stock Account. A Company Stock Account shall be established under each Participant’s Employer Contribution Account and shall be credited with all Matching Contributions and Discretionary Contributions made on behalf of a Participant which are invested in Company Stock.  (ii) Other Investments Account. An Other Investments Account shall be established under each Participant’s Employer Contribution Account and shall be credited with all Matching Contributions and Discretionary Contributions made on behalf of a Participant which are not invested in Company Stock.  5.01(2) General Account. The Plan Administrator shall also establish and maintain for the Trust suspense accounts to be known as an Unallocated Company Stock Account and an Unallocated Other Investments Account, in the event Company Stock is acquired with the proceeds of an Exempt Loan.  5.01(3) Rights in Trust. The maintenance of individual Accounts is only for accounting purposes, and a segregation of the assets of the Trust to each Account shall not be required.  5.02 Contribution Allocations to Accounts.    31    5.02(1) Pre-Tax Contribution Account.  (a) Company Stock Account. The Company Stock Account of the Pre-Tax Contribution Account of each Participant shall be increased (or decreased) as of each Allocation Date by his: (1) Pre-Tax Contributions invested in Company Stock; and (2) stock (in kind) dividends on Company Stock held in the Company Stock Account of his Pre-Tax Contribution Account. Such increase shall be recorded in whole and fractional shares of Company Stock in order that such Account shall share in any appreciation in the market value of the shares of Company Stock in the Company Stock Account, or in any decreases in such market value.  (b) Other Investments Account. The Other Investments Account of the Pre-Tax Contribution Account of each Participant will be increased (or decreased) as of each Allocation Date by the dollar value of his: (1) Pre-Tax Contributions not invested in Company Stock; (2) Qualified Nonelective Contributions made on his behalf, if any; (3) his allocable share (determined under Subsection 5.02(4) below) of the net income or loss attributable to this Account; (4) appreciation (or depreciation) in the fair market value of the assets of the Trust (other than Company Stock) attributable to this Account; and (5) cash dividends and other rights or warrants allocable to Company Stock held in the Company Stock Account of his Pre-Tax Contribution Account.  5.02(2) Employer Contribution Account.  (a) Company Stock Account. The Company Stock Account of the Employer Contribution Account of each Participant shall be increased (or decreased) as of each Allocation Date by his allocable share (determined under Subsection 5.02(4) below) of: (1) Matching Contributions contributed in kind by the Employer or invested in Company Stock by the Trust; (2) Discretionary Contributions contributed in kind by the Employer or invested in Company Stock by the Trust; (3) stock (in kind) dividends on Company Stock held in the Company Stock Account of his Employer Contribution Account; and (4) Company Stock released from the Unallocated Company Stock Account. Such increase shall be recorded in whole and fractional shares of Company Stock in order that such Account shall share in any appreciation in the market value of the shares of Company Stock in the Company Stock Account, or in any decreases in such market value.  (b) Other Investments Account. The Other Investments Account of the Employer Contribution Account of each Participant shall be increased (or decreased) as of each Allocation Date by the dollar value of his: (1) Matching Contributions in other than Company Stock; (2) Discretionary Contributions in other than Company Stock; (3) his allocable share (determined under Subsection 5.02(4) below) of the net income or loss attributable to this Account; (4) appreciation (or depreciation) in the fair market value of the assets of the Trust (other than Company Stock) attributable to this Account; (5) proceeds from the disposition of Company Stock previously held in the Company Stock Account of his Employer Contribution Account; and (6) his allocable share of cash and other rights or warrants with respect to fractional shares of Employer Contributions in Company Stock that cannot be allocated to the Company Stock Account of his Employer Contribution Account. It will be decreased for: (1) any payments on purchases of Company Stock or repayment of debt (including principal and interest) incurred for the purchase of Company Stock which are attributable to such Account; (2) any distributions or withdrawals; and (3) any expenses or Trustee’s compensation paid or reimbursed out of the Trust pursuant to Section 13.15 hereof or pursuant to the Trust Agreement.    32    (c) Employer Contributions. Notwithstanding Subsections 5.02(2)(a) and (b) above, if in any Plan Year the foregoing allocation would result in more than one-third (1/3) of total Employer Contributions for such Plan Year being allocated to the Prohibited Group, no Employer Contributions in excess of one-third (1/3) of total Employer Contributions shall be allocated to members of such group, but such excess shall be reallocated to all other eligible Participants according to the ratio that each such other eligible Participant’s Compensation bears to the total Compensation of all such other eligible Participants. For purposes of this Subsection, the “Prohibited Group” means a group of Participants consisting of highly compensated employees, as described in section 414(q) of the Code.  5.02(3) Unallocated Company Stock Account and Unallocated Other Investments Account.  (a) Unallocated Company Stock Account. The Unallocated Company Stock Account shall be increased as of each Allocation Date with the number of shares of Company Stock purchased with the proceeds of an Exempt Loan. The Unallocated Company Stock Account shall also be increased as of each Allocation Date with the stock (in kind) dividends received with respect to Company Stock held in such Account. The Unallocated Company Stock Account shall be decreased by the number of shares of Company Stock that are to be released from such Account in accordance with the provisions of Subsection 5.05(2) hereof.  (b) Unallocated Other Investments Account. The Unallocated Other Investments Account will be increased as of each Allocation Date (or decreased) by: (1) the dollar value of such Account’s allocable share of the net income (or loss) of the Trust attributable to such Account; (2) cash dividends and other rights or warrants received with respect to Company Stock in the Unallocated Company Stock Account; and (3) amounts attributable to such Account that are used to pay an Exempt Loan in accordance with Subsection 5.05(4) hereof.  5.02(4) Earnings Allocation Procedures. Subject to Section 5.06 below, Accounts shall be adjusted in accordance with the following:  (a) Income and Appreciation in Value of Other Investments Accounts in the Trust. The income of the Other Investments Accounts, the Unallocated Other Investments Account, the Employer Divesture Accounts and the After-Tax Contribution Accounts in the Trust (including the appreciation or depreciation in value of the assets in the Other Investments Accounts, the Employer Divesture Accounts and the After-Tax Contribution Accounts in the Trust) shall be allocated as of each Allocation Date to such Accounts in proportion to the balances in such Accounts as of the next preceding Allocation Date, but after first reducing each Account balance by any distributions or charges from such Account since the next preceding Allocation Date.  Any dividends allocated to the Unallocated Other Investments Account, to the extent not used to pay principal and interest on an Exempt Loan, shall: (i) first be allocated as a Matching Contribution pursuant to Section 5.05(3)(a); and (ii) to the extent such amounts exceed the Employer’s Matching Contribution obligations for the Plan Year shall be allocated as a Discretionary Contribution pursuant to Section 5.05(3)(b).    33    (b) Income and Appreciation in Value of Company Stock Accounts in the Trust. The income (except stock (in kind) dividends with respect to Company Stock and except the unrealized appreciation or depreciation in value of the assets in the Company Stock Accounts in the Trust) of both the Company Stock Accounts and the Unallocated Company Stock Account of the Trust shall be allocated as of each Allocation Date to the Other Investments Accounts and Unallocated Other Investments Account, as is appropriate, in proportion to the balances, as of the last Allocation Date, in the respective Company Stock Accounts or Unallocated Company Stock Account to which the income is attributable but after first reducing each such Account balance by any distributions or charges from such Accounts since the last Allocation Date. Cash or stock (in kind) dividends with respect to Company Stock shall be allocated to the Account which held the Company Stock that generated the cash or stock (in kind) dividend; provided, however, that cash or stock (in kind) dividends with respect to Company Stock then allocated to the Unallocated Company Stock Account or the Unallocated Other Investments Account may first be used to pay principal and interest on an Exempt Loan.  5.03 Time of Allocating Contributions. Subject to Sections 4.07, 5.06 through 5.08 and Subsection 19.03(2), Pre-Tax Contributions and Matching Contributions shall be allocated as of the Allocation Date among all Participants (the “Eligible Participants”) who have made Pre-Tax Contributions, respectively, since the last Allocation Date. Each Participant’s allocable share of Matching Contributions shall equal twenty percent (20%) of such Participant’s Pre-Tax Contributions since the last Allocation Date. Discretionary Contributions, if any, for each Plan Year shall be allocated as of the last day of the Plan Year. QNECs shall be allocated in accordance with Subsection 4.05(3)(c).  5.04 Accounts of Participants Transferred to an Affiliated Company Which Has Not Adopted the Plan. If a Participant is transferred to an Affiliated Company which has not adopted the Plan, the amount in the Trust which is credited to his Accounts shall continue to share in the earnings, losses, appreciation, or depreciation of the Trust Fund, and such Participant’s rights and obligations with respect to such Accounts shall be governed by the provisions of the Plan and Trust.  5.05 Treatment of Company Stock Purchased under an Exempt Loan.  5.05(1) Debt Purchase of Company Stock. Any Company Stock purchased by the Trust under an Exempt Loan shall be allocated initially to the Unallocated Company Stock Account.  5.05(2) Release from Unallocated Company Stock Account. As of each Allocation Date, there shall be released from the Unallocated Company Stock Account a portion of the Company Stock purchased under an Exempt Loan by the Trust equal to the number of shares determined by taking the shares so purchased which have not theretofore been released from the Unallocated Company Stock Account multiplied by the ratio of (1) the amount of principal and interest paid under the Exempt Loan subsequent to the last Allocation Date, to (2) the total of all principal and interest to be paid for the current and all future years. Notwithstanding the preceding, the number of shares released pursuant to this Section 5.05(2) for any Plan Year shall equal the number of shares purchased under an Exempt Loan which have not theretofore been released from the Unallocated Company Stock Account and multiplied by the ratio of (1) the amount of principal and interest paid under the Exempt Loan for the Plan Year to (2) the total of all principal and interest to be paid for the current and future years.    34    5.05(3) Allocation to Company Stock Accounts. The number of shares of Company Stock released pursuant to Subsection 5.05(2) shall be allocated to the Company Stock Accounts of Participants pursuant to the following provisions.  (a) Matching Contributions. The total number of shares released and allocable as a Matching Contribution shall be determined by multiplying the total shares released by a fraction the numerator of which is the amount of the cash contribution needed to fund the Employer’s Matching Contribution obligation for the Plan Year (after allocation of dividends pursuant to Subsection 5.02(4)(b)), and the denominator of which is the total amount of cash contributed to the Plan for such Plan Year. Each Participant’s allocable share of the Company Stock released which is attributable to the Matching Contribution shall be determined by multiplying the number of shares released pursuant to the Matching Contribution by a fraction the numerator of which is the Participant’s Matching Contribution funds for the Plan Year used to repay principal and interest on an Exempt Loan and the denominator of which is the aggregate of all Matching Contribution funds for the Plan Year used to repay principal and interest on an Exempt Loan.  (b) Discretionary Contributions. The total number of shares released and allocable as a Discretionary Contribution shall equal all remaining shares released after application of Subsection 5.05(3)(a). Each Participant’s allocable share of the Company Stock released which is attributable to the Discretionary Contribution for the Plan Year shall be determined by multiplying the number of shares released pursuant to the Discretionary Contribution for the Plan Year by a fraction the numerator of which is the Participant’s Compensation for the Plan Year and the denominator of which is the Compensation of all Participants.  5.05(4) Payments on an Exempt Loan. As of each Allocation Date, installment payments, including principal and interest, made by the Trust out of Matching Contributions or Discretionary Contributions since the last preceding Allocation Date under an Exempt Loan, will decrease the Other Investments Accounts in the same proportion that Matching Contributions and Discretionary Contributions are allocated under the provisions of Subsection 5.05(3) hereof. Dividends from the Unallocated Other Investments Account that are used to pay principal and interest of any installment payments shall also decrease the Unallocated Other Investments Account. For purposes of determining payments on an Exempt Loan, to the extent Matching Contributions are not sufficient to satisfy all amounts currently due, Discretionary Contributions shall be made in an amount sufficient to fully satisfy all amounts currently due. Each Exempt Loan shall provide for payment of principal and interest substantially in accordance with the following: all income (“specified income”) allocable to the Unallocated Company Stock Account and Unallocated Other Investments Account that is attributable to collateral for the obligation shall be used, before any Matching Contributions or Discretionary Contributions are so used, to pay principal amounts due under such Exempt Loan; Matching Contributions and Discretionary Contributions shall be first applied to repay interest under an Exempt Loan with any excess used to fund current principal requirements not otherwise funded by the specified income; if the specified income of the Unallocated Company Stock Account and Unallocated Other Investments Account is not sufficient to pay principal due under an Exempt Loan, then Matching Contributions and Discretionary Contributions shall be used to fund the difference; if the specified income exceeds the amount necessary to pay principal due on Exempt Loans for the Plan Year, then such excess amount shall be first used to pay interest currently due, if any, with respect to the Exempt Loan and any remaining amount of income may, at the direction and in the discretion of the Plan Administrator, be used to     35     prepay principal due on an Exempt Loan in succeeding Plan Years. Any remaining amount of income not so used shall be allocated to Participants’ Accounts in accordance with Subsections 5.02(4)(a) and 5.02(4)(b).  5.06 Limitation on Annual Additions Under Code section 415. The provisions of Code section 415 are incorporated by reference, to the extent not expressly stated below.  5.06(1) Notwithstanding any other provision of the Plan, and except to the extent permitted under section 414(v) of the Code, if applicable, the Annual Addition that may be contributed or allocated to a Participant’s Account under the Plan for any Limitation Year shall not exceed the lesser of: (a) $40,000, as adjusted for increases in the cost-of-living under section 415(d) of the Code, or (b) 100 percent of the Participant’s Compensation, within the meaning of section 415(c)(3) of the Code, for the Limitation Year. The Compensation limit referred to in (b) shall not apply to any contribution for medical benefits after separation from service (within the meaning of section 401(h) or section 419A(f)(2) of the Code) which is otherwise treated as an Annual Addition. The term “Annual Additions” to a Participant’s Account for any Limitation Year shall mean the sum of:  (a) such Participant’s allocable share of the Matching Contributions and Discretionary Contributions credited to such Participant within such Limitation Year provided, however, that any such contributions applied to the payment of the interest portion of any Exempt Loan shall not be counted as an Annual Addition;  (b) the amount of such Participant’s Pre-Tax Contributions under the Plan, put in if any, for such Limitation Year;  (c) any amount allocated to an “individual medical account,” as defined in Code section 415(l)(2), which is part of a pension or annuity plan maintained by an Employer; and  (d) any amounts derived from contributions paid or accrued after December 31, 1985, in the first taxable year for which a reserve is established pursuant to Code section 419A and each subsequent year, which are attributable to post-retirement medical benefits allocated to the separate account of a key employee (as defined in Code section 419A(d)(3)) under a welfare benefit fund (as defined in Code section 419(e)) maintained by an Employer.  Provided, however, that the twenty-five percent (25%) limitation set forth in this Subsection 5.06(1)(ii) shall not apply to amounts described in Subsection 5.06(1)(ii)(d).  Solely for purposes of this Section, the determination of a Participant’s Pre-Tax Contributions for a Limitation Year shall exclude the items set forth in Treasury Regulations Sections 1.415-6(b)(3)(i)-(iv), and the determination of a Participant’s allocable share of Matching Contributions for a Limitation Year shall exclude any Matching Contributions allocated to such Participant for any of the reasons set forth in Treasury Regulations Sections 1.415-6(b)(2)(ii)-(vi) (except as otherwise provided in such Sections).  5.06(2) In the event that as a result of: (i) a reasonable error in estimating a Participant’s Limitation Year Compensation or (ii) other facts and circumstances which the Internal Revenue Service finds justify the availability of the provisions of this Subsection and Subsection     36     5.02(3), it is determined that the Annual Additions to a Participant’s Account for any Limitation Year will exceed the limitations contained herein, such Annual Additions shall be reduced to the extent necessary to meet the limitations contained in Subsection 5.02(1) by first reducing, to the extent necessary, such Participant’s After-Tax Contributions, then by reducing, to the extent necessary, such amounts allocated to the Participant’s Pre-Tax Contribution Account, then by reducing to the extent necessary, his allocable share of Matching Contributions for the Plan Year ending within such Limitation Year. If such prospective reductions are not sufficient to cure the excess Annual Additions, the Participant’s Pre-Tax Contributions and/or After-Tax Contributions shall be refunded as necessary to meet the limitations.  5.06(3) If the amount of any Participant’s allocable share of Matching Contributions is reduced in accordance with Subsection 5.06(2), the amount of such reduction shall be maintained in a suspense account under the Trust to be used to reduce Matching Contributions for all Participants for the next Limitation Year (and succeeding Limitation Years, if applicable). Any suspense account established pursuant to this Subsection shall not be adjusted to reflect net income, loss, appreciation or depreciation in the value of the Trust Fund as provided for a Participant’s regular Accounts pursuant to Article 6.  5.06(4) If the amount of any Participant’s Pre-Tax Contributions are refunded in accordance with Subsection 5.06(2), the amount of such refund (adjusted for earnings, losses, appreciation, or depreciation) shall be disregarded for purposes of the Ten Thousand Five Hundred Dollars ($10,500) limitation set forth in Subsection 4.04(1)(b) and Section 4.06.  5.06(5) In the event of termination of the Plan, the suspense account described in Subsection 5.06(3) shall revert to the Company to the extent it may not then be allocated to any Participant’s Account.  5.07 Limitations on Annual Additions for Employers or Affiliated Companies Maintaining other Defined Contribution Plans. In the event that any Participant in this Plan is also a participant under any other Defined Contribution Plan maintained by an Affiliated Company, the total amount of Annual Additions to such Participant’s accounts under all such Defined Contribution Plans shall not exceed the limitations set forth in Subsection 5.06(1). If such total amount of Annual Additions to each Participant’s Accounts under all such Defined Contribution Plans does exceed the limitations set forth in Subsection 5.06(1), then the Annual Additions to a Participant’s Account in the Plan shall be reduced after contributions to all other qualified plans of the Company are reduced.  5.08 Definitions for Purposes of Determining the Annual Addition Limitations. For purposes of Sections 5.06, 5.07, and this Section 5.08, the following definitions shall apply:  5.08(1) “Retirement Plan” means: (a) any profit sharing, pension, or stock bonus plan described in Code sections 401(a) and 501(a); (b) any annuity plan or annuity contract described in Code section 403(a) or 403(b); and (c) any simplified employee pension plan described in Code section 408(k).  5.08(2) “Defined Contribution Plan” means a Retirement Plan which provides for an individual account for each participant and for benefits based solely on the amount contributed to the participant’s account, and any income, expenses, gains, or losses, and any forfeitures of accounts of other participants which may be allocated to such participant’s account.    37    5.08(3) “Limitation Year” means the Plan Year.  5.08(4) “Limitation Year Compensation” means a Participant’s total compensation for services rendered to an Employer during a Plan Year, as reported on Form W-2 or other federal wage statement as taxable for federal income tax purposes, except that for only those Employees of ClubCorp International Resource Company who are nonresident aliens who receive no earned income (within the meaning of Code section 911(d)(2)) which is U.S. source income (within the meaning of Code section 861(a)(3), Limitation Year Compensation shall mean: (i) such Participant’s wages, salaries, earned income (only if an employee within the meaning of Code section 401(c)(1)) which includes foreign earned income (as defined in Code section 911(b)) whether or not excludable from gross income under Code section 911, foreign earned income (as defined in Code section 911(b)) whether or not excludable from gross income under Code section 911, fees for professional services, and other amounts received from an Employer for personal services actually rendered in the course of employment with an Employer as an Employee to the extent that the amounts are includible in gross income (including, but not limited to, commissions paid salesmen, overtime pay, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits and reimbursements or other expense allowances under a nonaccountable plan, as described in Treasury Regulations Section 1.62-2(c)), but determined without regard to the exclusions found in Code sections 931 and 933; (ii) amounts received by such Participant described in Code sections 104(a)(3), 105(a) and 105(h), but only to the extent that these amounts are includible in the gross income of the Employee; (iii) amounts paid or reimbursed by the Employer to such Participant for moving expenses incurred by such Participant, but only to the extent that at the time of payment it is reasonable to believe that these amounts are not deductible by such Participant under Code section 217; (iv) the value of nonqualified stock options granted to such Participant, but only to the extent that the value of the option is includible in the gross income of such Participant for the taxable year in which granted; and (v) the amount includible in the gross income of such Participant upon making the election described in Code section 83(b), but excluding the following:  (a) Employer contributions to a plan of deferred compensation to the extent contributions are not included in gross income of the Participant for the taxable year in which contributed, and any distributions from a plan of deferred compensation whether or not includible in the gross income of the Participant when distributed;  (b) Employer contributions made on behalf of the Participant to a simplified employee pension described in Code section 408(k);  (c) amounts realized from the exercise of a nonqualified stock option, or when restricted stock (or property) held by the Participant becomes freely transferable or is no longer subject to a substantial risk of forfeiture;  (d) amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; and  amounts that receive special tax benefits, or contributions made by the Employer (whether or not under a salary reduction agreement) towards the purchase of an annuity contract described in Code section 403(b) (whether or not the contributions are excludable from the gross income of the Participant). Notwithstanding the foregoing, Compensation shall include the amount of a     38     Participant’s elective salary reductions or salary deferrals under any Employer’s cafeteria plan established pursuant to Code section 125, an Employer’s plan established pursuant to Code sections 402(g)(3) and 457, and amounts excluded from gross income of a Participant under section 132(f) of the Code.  5.09 Cessation of Eligible Employee Status. If any Participant does not incur a Termination of Employment but ceases to be an Eligible Employee then, during the period that such Participant is not an Eligible Employee: (i) such Participant’s Accounts shall continue to share in the earnings, losses, appreciation, or depreciation of the Trust Fund; and (ii) such Participant shall receive credit for vesting purposes pursuant to Section 10.01 for any Vesting Years of Service completed during such period.  5.10 Inclusion of Ineligible Employee and Erroneous Allocations. If in any Plan Year any person who should not have been included as a Participant in the Plan is erroneously included and Pre-Tax Contributions, Matching Contributions or Discretionary Contributions are mistakenly made on such Participant’s behalf, the Plan records shall be corrected and such Pre-Tax, Matching and Discretionary Contributions shall be treated as Forfeitures for the Plan Year in which the discovery is made.    39    ARTICLE 6. - VALUATION OF TRUST FUND  6.01 Valuation of the Trust Fund and Account Statements.  6.01(1) Subject to Section 6.01(2), within a reasonable time after the Allocation Date, the Plan Administrator shall have the Trustee prepare a statement of the condition of the Trust Fund as of the close of business on such Allocation Date setting forth: (i) the non-Company Stock assets of the Trust Fund as of such Allocation Date, and the cost and current value thereof as defined in ERISA Section 3(26) (the “Current Value”) and (ii) all non-Company Stock investments, receipts, disbursements and other transactions effected by it.  6.01(2) Notwithstanding anything to the contrary contained herein, Company Stock shall be valued as of each Semiannual Valuation Date by an independent appraiser selected and retained by the Plan Administrator; provided, however, that in the event Company Stock becomes publicly traded, the foregoing sentence shall not apply. Allocations pursuant to Article 5 shall use the most current available valuation of Company Stock.  6.01(3) The Trustee’s (or, in the case of Company Stock, the appraiser’s) determination of the Current Value of the assets in the Trust Fund and the Plan Administrator’s charges or credits to the individual Accounts with respect to Participants, Beneficiaries, or Alternate Payees, as provided in Section 6.02, shall be final and conclusive on all persons ever interested hereunder.  6.02 Forfeitures.  6.02(1) Application of Forfeitures. Forfeitures under this Plan shall be applied pursuant to Section 10.04(6).  6.02(2) Computations. All of the computations required to be made under the provisions of this Article 6, when made, shall be conclusive with respect thereto and shall be binding upon all the Participants, Beneficiaries, Alternate Payees, and all other persons ever having an interest in the Trust Fund.  6.03 Trust Fund. The Trust shall be invested in Company Stock (which is a qualifying employer security within the meaning of ERISA), provided, however, that to the extent the Plan Administrator determines it is required under ERISA to do so, or cash is needed for administrative expenses, withdrawals, diversification elections, or distributions, assets of the Trust Fund shall be invested in investments other than Company Stock. All purchases of qualifying employer securities, including Company Stock, shall be for no more than the fair market value, as determined in good faith by the Plan Administrator and confirmed by an appraisal submitted by an independent appraiser selected and retained by the Plan Administrator, and no commission shall be charged with respect to any purchase from a party in interest.  6.04 Voting of Shares; Exercise of Other Rights. Shares of Company Stock in the Trust shall be voted by the Trustee as shall be directed by the Plan Administrator. With respect to any corporate matter which involves the voting of such shares at a shareholder meeting and which     40     constitutes a merger, consolidation, recapitalization, reclassification, liquidation, dissolution, sale of substantially all assets of a trade or business or a similar transaction specified in regulations under Section 409(e)(3) of the Code, however, each Participant (or Beneficiary) will be entitled to give confidential instructions to the Trustee as to the voting of shares of Company Stock then allocated to his Company Stock Account. In that event, any allocated Company Stock with respect to which voting directions are not given shall be voted, and shares of Company Stock held by the Trust which are not then allocated to Participants’ Company Stock Accounts shall be voted in the manner determined by the Plan Administrator. In the event the Company becomes publicly traded, i.e. the Company Stock is required to be registered under Section 12 of the Securities Exchange Act of 1934, each Participant will be entitled to give confidential instructions to the Trustee as to the voting of all shares of Company Stock then allocated to his Company Stock Account (as outlined above) as to all corporate matters requiring a shareholder vote.  6.05 Put Option with Respect to Company Stock. Any Company Stock, if it is not publicly traded, when distributed or is subject to a trading limitation when distributed, must be subject to a put option. The put option is to be exercisable only by the Participant, the Participant’s donees, an Alternate Payee, or by a person (including an estate or its distributee) to whom the Company Stock passes by reason of a Participant’s death. The put option must permit the Participant to put the Company Stock to the Employer. The put option must be exercisable during the sixty (60) consecutive days beginning on the date that the Company Stock subject to the put option is distributed by the Plan, and for another sixty (60) consecutive days during the Plan Year next following the Plan Year in which the shares were distributed. The put option may be exercised by the holder by notifying the Employer in writing that the put option is being exercised. The period during which a put option is exercisable does not include any period when a distributee is unable to exercise it because the party bound by the put option is prohibited from honoring it by applicable federal or state law. The price at which the put option is exercisable is the fair market value of the Company Stock on the date of the transaction determined in good faith based on all relevant factors.  Payment pursuant to the put option shall be made: (1) in the case of distribution of the Participant’s entire Account within one taxable year of the recipient, no less rapidly than in substantially equal installments at least annually over a period beginning no later than thirty (30) days after the exercise of the put option and not exceeding five (5) years in all; adequate security shall be provided and reasonable interest shall be paid on any installments outstanding after thirty (30) days after exercise of the put option; and (2) in the case of any other form of distribution not described in the directly preceding clause (1) of this paragraph in this Section 6.05, within thirty (30) days of the exercise of the put option. Notwithstanding the preceding, payment pursuant to the put option may be extended to a date no later than ten (10) years after the earlier of the date the put option is exercised or the date of final repayment of any debt incurred in connection with the acquisition of the Company Stock. The provisions described in this Section 6.05 are nonterminable even if the Exempt Loan is repaid or the Plan ceases to be an employee stock ownership plan, or the custodian or trustee of an individual retirement account described in Code section 408(a) established by the Participant or his surviving spouse.  6.06 Exempt Loan to Purchase Company Stock; Certain Conditions Applicable to Such Company Stock. It is the express purpose of this Plan and its related Trust Agreement to invest substantial sums in Company Stock for the benefit of Participants in the Plan. Pursuant to this purpose, it is contemplated that the Trustee will from time to time, upon the direction of the Plan Administrator, borrow funds either through installment purchase contract, loan agreement or other     41     instrument of indebtedness (Exempt Loan) in order to purchase Company Stock with such indebtedness either guaranteed by the Employer or one or more Affiliated Companies or made directly from the Employer or one or more Affiliated Companies to the Trust.  6.06(1) Use of Proceeds. All proceeds of such an Exempt Loan shall be used within a reasonable time after receipt by the Trustee only for any or all of the following purposes: to purchase Company Stock, to repay obligations incurred under the Exempt Loan or to repay a prior Exempt Loan.  6.06(2) Non-Recourse Loans Only. Any Exempt Loan must be without recourse as against the Plan and the Trust.  6.06(3) Collateral. The only assets of the Plan and Trust which may be given as collateral for an Exempt Loan are shares of Company Stock acquired with the proceeds of the Exempt Loan and those shares of Company Stock that were used as collateral on a prior Exempt Loan repaid with the proceeds of the current Exempt Loan.  6.06(4) Creditor’s Rights to Assets. No person entitled to payment under the Exempt Loan shall have any right to assets of the Plan or Trust other than collateral given for the Exempt Loan, contributions (other than contributions of Company Stock) that are made under the Plan to meet the Plan’s obligations under the Exempt Loan, and earnings attributable to such collateral and the investment of such contributions.  6.06(5) Transfers Upon Default. In the event of default upon an Exempt Loan, the value of Plan assets transferred in satisfaction of the Exempt Loan must not exceed the amount of default. If the lender is a “disqualified person,” the Exempt Loan must provide for a transfer of Plan assets upon default only upon and to the extent of the failure of the Plan to meet the repayment schedule of the Exempt Loan.  6.06(6) Interest. The interest rate of any Exempt Loan described herein must not be in excess of a reasonable rate of interest. In determining what is a reasonable rate of interest, all relevant factors will be considered, including the amount and duration of the loan, the security and guarantee (if any) involved, the credit standing of the Plan and Trust and the guarantor (if any), and the interest rate prevailing for comparable loans. A variable interest rate is permissible if determined to be reasonable.  6.06(7) Release from Collateral or Suspense. The instrument evidencing the indebtedness shall provide for release from collateral or suspense in accordance with the provisions of Subsection 5.05(2) of the Plan.  6.06(8) Limitation or Restrictions on Company Stock; Right of First Refusal. Except as provided herein or in Section 6.05, no Company Stock acquired with the proceeds of an Exempt Loan may be subject to a put, call, or other option, or buy-sell or similar arrangement while held by and when distributed from the Plan or its related Trust, whether or not the Plan is then an “Plan” within the ambit of Section 54.4975-7(b)(1)(i) of the Treasury Regulations, unless specifically required or permitted by such regulations. A holder (“Shareholder”) of shares of Company Stock which have been distributed by the Trustee, may not, for valuable consideration, sell, assign, pledge, convey in trust, or otherwise transfer or encumber in any manner or by any means whatever     42     (“Transfer”) any interest in all or any part of Company Stock held by him except in accordance with the terms and conditions of this Subsection 6.06(8), if at the time of such Transfer the Company Stock is not publicly traded. Provided, however, “Transfer” shall not include any transfer of such shares by reason of a Participant’s death, any transfer to an Alternate Payee, or the transfer by a Participant or his surviving spouse of the shares to an individual retirement account, described in Code section 408(a), in a transaction described in Code section 402(c). Upon the receipt of the Notice described below, the Company shall have the first option to purchase the shares to be Transferred by the Shareholder, and, if that option is not exercised in full by the Company, then Trustee shall have the option to purchase shares not purchased by the Company. Prior to any proposed Transfer, the Shareholder must first give written notice (“Notice”) to the Plan Administrator that he intends to Transfer his shares of Company Stock or any interest therein, which Notice shall state the number of shares to be transferred, the name of the proposed transferee, the consideration for the proposed Transfer, and the terms and conditions of the Transfer. The Shareholder shall also submit with the Notice copies of all papers and other documents to be used in connection with the proposed Transfer. Any deviation in the terms of such Transfer, however slight, shall require a new Notice thereby effecting a new option under this Subsection 6.06(8).  The Company must exercise its option to purchase, as to all or a portion of the shares offered, within fourteen (14) days of receipt of the Notice. If the Company fails to exercise its option as to any or all of the shares, then the Trustee (as directed by the Plan Administrator) shall be entitled to act upon its option to purchase within that same fourteen (14) day period. Options shall be exercised in the form of written notice of exercise to the Shareholder or his legal representative within the designated period.  If the option is not exercised in full by the Company, the Trustee, or both, within fourteen (14) days after Notice, the unexercised part of the option shall lapse, and then the proposed Transfer (if to a transferee other than the Company or Trustee) must be completed within ninety (90) days following the end of the period for exercise, but only upon the same terms and at a price which is no less than that set forth in the Notice. Any such permitted Transfer, however, shall be conditioned upon the proposed transferee executing such documents as counsel for the Company may reasonably request which evidences the transferee’s agreement to abide by the terms and provisions of this Subsection 6.06(8) concerning the shares, or any interest therein proposed to be acquired, and to agree to any legending of certificates and to any restrictions on transferability as the Company may reasonably require to ensure compliance with federal or state securities laws.  In exercising an option to purchase, the Company, Trustee, or both, as the case may be, must purchase pursuant to the terms of the Notice and at the greater of the fair market value such shares of Company Stock or the price specified in the Notice. The terms of the payment of the purchase price shall in no event be less favorable than the terms of an independent third-party offer.  6.06(9) Limitations on Payments. The payments made during any Plan Year with respect to an Exempt Loan described herein may not exceed an amount equal to the sum of (1) the Matching Contributions, plus (2) the Discretionary Contributions, plus (3) earnings received during or previous to the current Plan Year less payments previously made with respect to such loan, plus (4) any dividends received by the Trust on Company Stock purchased with the proceeds of an     43     Exempt Loan. The Employer Contributions and earnings described herein must be accounted for separately on the books of account of the Plan and Trust until any Exempt Loan is repaid, as is provided in the other provisions of Article 5 of this Plan.  6.06(10) Term of Exempt Loans. Any Exempt Loan made by the Plan or Trust for the purpose of purchasing Company Stock must be for a specific term and may not be payable on the demand of any person, except in the case of default.  6.07 Diversification of Participant’s Account. This Section shall apply to the extent a Participant’s Account is credited with Company Stock (“Eligible Assets”). A Participant who has attained age fifty-five (55) and who has completed ten (10) or more years of participation in the Plan (“Eligible Age 55 Participant”) may elect to have twenty-five percent (25%) of the Eligible Assets then in his Account (and if in Company Stock, after converting such Company Stock into cash at the Company Stock’s current fair market value) transferred to the ClubCorp Individual Investment Plan (“IIP”). Such an election shall be permitted each year during the period of ninety (90) days after the close of each Plan Year in a period of six (6) consecutive Plan Years beginning with the Plan Year during which the Participant first becomes an Eligible Age 55 Participant. Participation for this purpose does not include any Years of Service prior to establishment of the Plan or participation in any other plan. When an Eligible Age 55 Participant has made such an election, the Eligible Assets to be converted and transferred shall be so converted and transferred from the Eligible Age 55 Participant’s Accounts in the following order, bringing each Account balance to zero before converting and transferring the next Account’s balance: (1) After-Tax Contribution Account, (2) Pre-Tax Contribution Account, (3) Employer Divestiture Account, and (4) Employer Contribution Account. During the last such election period, an Eligible Age 55 Participant may elect to convert and transfer fifty percent (50%) of the Eligible Assets in his Account, taking into account all assets as to which he has previously made an election at the fair market value of such assets at the time a prior election is made. To the extent that a Participant makes an election under this Section 6.07, the portion of the Eligible Assets in the Participant’s Account that is subject to the election shall, subject to Section 6.06 hereof, be converted and transferred to the IIP no later than ninety (90) days after the end of the election period.  6.08 Emergency Valuation. Subject to Section 6.01(2), it is contemplated that the Trust will be valued by the Trustee and allocations made as of each Allocation Date. However, should the Plan Administrator in good faith determine that, because of an extraordinary change in general economic conditions or the occurrence of an event radically affecting the value of all or a substantial part of the Trust, an abnormal fluctuation in the value of the Trust has occurred since the end of the preceding Plan Year, and that it has become necessary to make a distribution to one (1) or more Participants, Beneficiaries, or Alternate Payees under the provisions hereof, the Plan Administrator may, in its sole discretion, to prevent any such person from receiving a substantially greater or lesser amount than what he would be entitled to, based on the current value of the Trust (as defined in ERISA Section 3(26)), cause a revaluation of the Trust to be made and a reallocation of the interests therein as of the date such person’s right of distribution becomes fixed. The Plan Administrator’s determination to make such emergency valuation and the valuation of the Trust as determined by the Trustee (or in the case of Company Stock, by the independent appraiser selected by the Plan Administrator) shall be conclusive and binding on all persons ever interested hereunder.    44    ARTICLE 7. - RETIREMENT BENEFITS  A Participant’s Employer Contribution Account shall fully vest on his Normal Retirement Date, provided such Participant is employed by an Affiliated Company on such date. A Participant who continues in the Employer’s employment after his Normal Retirement Date shall continue to be a Participant in the Plan until his actual retirement. Upon actual retirement on or after his Normal Retirement Date, a Participant shall be entitled to receive distribution of the balance of his entire Account as of the Allocation Date coinciding with or immediately following the date on which such Participant retires. Payment upon retirement shall be made by the Trustee at the direction of the Plan Administrator at the time and manner provided in Article 11.    45    ARTICLE 8. - DISABILITY BENEFITS  8.01 Disability Retirement. If a Participant retires by reason of Disability while in the employ of an Affiliated Company or on Leave of Absence, his Employer Contribution Account shall fully vest and he shall be entitled to receive distribution of the balance of his entire Account as of the Allocation Date coinciding with or immediately following the date on which such Participant retires. Payments resulting from a Participant’s retirement on account of Disability shall be made by the Trustee at the direction of the Plan Administrator at the time and in the manner provided in Article 11.  8.02 Determination of Disability. The Plan Administrator shall determine whether a Participant has suffered a Disability, and its determination in that respect is binding upon the Participant, provided that the Plan Administrator may rely upon professional medical advice in making such determination. In making its determination, the Plan Administrator may require the Participant to submit to medical examinations by doctors selected by the Plan Administrator. The provisions of this Article 8 shall be uniformly and consistently applied to all Participants.    46    ARTICLE 9. - DEATH BENEFITS  9.01 Death Benefits. Upon the death of a Participant while in the employ of an Affiliated Company or on Leave of Absence, his Employer Contribution Account shall fully vest and his Beneficiary, determined in accordance with Section 9.02, shall be entitled to receive distribution of the balance of his entire Account as of the Allocation Date coinciding with or immediately following such Participant’s date of death, provided proper proof of death is filed with the Plan Administrator.  Upon the death of a Participant who is no longer employed by an Affiliated Company prior to receipt by such Participant of all amounts to which such Participant is entitled under the provisions of the Plan, his Beneficiary, determined in accordance with Section 9.02, shall be entitled to receive distribution of the undistributed balance of such Participant’s Account, to the extent otherwise vested, as of the Allocation Date coinciding with or immediately following such Participant’s date of death, provided proper proof of death is filed with the Plan Administrator.  Payments resulting from the death of a Participant shall be made by the Trustee at the direction of the Plan Administrator at the time and in the manner provided in Article 11.  9.02 Designation of Beneficiaries.  9.02(1) Subject to the provisions of Subsections 9.02(2) and 12.03(2), each Participant may designate a Beneficiary or Beneficiaries, and contingent Beneficiary or Beneficiaries, if desired, including the executor or administrator of his estate, to receive his interest in the Trust Fund in the event of his death, but the designation of a Beneficiary shall not be effective for any purpose unless and until it has been filed with the Plan Administrator on the form provided therefor. If the Participant has a surviving spouse, the amount, if any, which is payable hereunder in respect of such deceased Participant shall be paid to the surviving spouse unless the Participant is survived by a Beneficiary designated in accordance with Subsection 9.02(2). If the Participant does not have a surviving spouse and the deceased Participant failed to name a Beneficiary in the manner herein prescribed, or the Beneficiary or all Beneficiaries so named predecease the Participant, the amount, if any, which is payable hereunder in respect of such deceased Participant shall be paid to the estate of such deceased Participant, in the form of a lump sum payment as soon as practicable following the Participant’s death. Any payment made to any person pursuant to the power and discretion conferred upon the Plan Administrator by the preceding sentence shall operate as a complete discharge of all obligations under the Plan in respect of such deceased Participant and shall not be subject to review by anyone, but shall be final, binding, and conclusive on all persons ever interested hereunder.  Subject to the provisions of Subsection 9.02(2), a Participant may from time to time change any Beneficiary designated by him without notice to such Beneficiary, under such rules and regulations as the Plan Administrator may from time to time promulgate, but the last Beneficiary designation filed with the Plan Administrator shall control.  9.02(2) Notwithstanding any other provision herein to the contrary, but subject to the provisions of Subsection 12.03(2), if, as of such Participant’s death, such Participant is married, the vested portion of such Participant’s Accounts shall, on his death, be paid to the surviving spouse     47     to whom he was married at the date of his death unless the surviving spouse has made a Qualified Consent to the payment of any or all of said Accounts to a designated Beneficiary other than the surviving spouse. “Qualified Consent” means an irrevocable written consent executed by the Participant’s spouse which acknowledges the effect of the consent and is witnessed by a Plan representative or a notary public. A Participant may, after obtaining a Qualified Consent, change his Beneficiary designation as permitted by Subsection 9.02(1), but any such change is subject to the requirements of this Subsection 9.02(2) and will require another Qualified Consent should the spouse, if surviving, not be the sole Beneficiary of all amounts in the Account, unless a Qualified Consent previously executed by such spouse expressly authorizes changes in the Beneficiary without further consent of the spouse. A Qualified Consent is effective only with respect to the spouse who executes it. If the Plan Administrator is satisfied that there is no spouse, or that the spouse cannot reasonably be located, or in such other circumstances as permitted by Treasury Regulations, no Qualified Consent shall be required as a condition to payment, under Section 9.01, to a Beneficiary who is not the surviving spouse.    48    ARTICLE 10. - EMPLOYMENT TERMINATION BENEFITS  10.01 Vesting upon Termination of Employment. Subject to the provisions of Section 10.03 and Subsection 12.03(2), with regard to Matching Contributions made with respect to payroll periods beginning before January 1, 2002 and with regard to all Discretionary Contributions regardless of when made, in the event of the Termination of Employment of a Participant, such Participant shall be entitled to receive distribution of the following percentage of his Employer Contribution Account:            Vesting Years of Service     Nonforfeitable Percentage ofAccount    Less than 3 years    0 %     3 years but less than 4 years    30 %     4 years but less than 5 years    40 %     5 years but less than 6 years    60 %     6 years but less than 7 years    80 %     7 years or more    100 %  Notwithstanding the foregoing, for Participants hired before January 1, 1989, their vested percentage shall be one percent (1%) rather than zero percent (0%) prior to being credited with three (3) Vesting Years of Service.  Subject to the provisions of Section 10.03 and Subsection 12.03(2), with regard to Matching Contributions made with respect to payroll periods beginning on or after January 1, 2002, in the event of the Termination of Employment of a Participant, such Participant shall be entitled to receive distribution of the following percentage of his Employer Contribution Account attributable to Matching Contributions made on or after January 1, 2002:            Vesting Years of Service     Nonforfeitable Percentage ofAccount    Less than 2 years    0 %     2 years but less than 3 years    20 %     3 years but less than 4 years    40 %     4 years but less than 5 years    60 %     5 years but less than 6 years    80 %     6 years or more    100 %    49    The Participant shall also be entitled to receive distribution of his entire After-Tax Contribution Account, Pre-Tax Contribution Account, and Employer Divestiture Account, if any.  Payment pursuant to this Article 10 shall be made by the Trustee, at the direction of the Plan Administrator, at the time and manner provided in Article 11.  10.02 Determination of Vesting Years of Service. All Vesting Years of Service (whether or not continuous) shall be taken into account.  10.03 Vesting on Divestiture of an Employer. If an Employer ceases to be an Affiliated Company as a result of a divestiture by the Company, the Accounts of Participants who are Employees of the divested Employer as of the date of the divestiture shall become one hundred percent (100%) vested as of that date. If a Participant who is an Employee of a divested Employer transfers to employment with another Employer, an Employer Divestiture Account shall be established for the Participant and the fully vested balance in the Participant’s Account shall be transferred to the Employer Divestiture Account. Full vesting pursuant to this Section shall not affect the vesting of any Matching Contributions made for such Participant subsequent to the divestiture. Following such Participant’s transfer, all subsequent Matching Contributions allocated to the Participant shall be allocated to the Participant’s Company Stock Account and shall be subject to the provisions of this Plan otherwise applicable to the Participant.  Any adjustments provided for in Article 6 shall be made separately with respect to such Participant’s Employer Divestiture Account and his Employer Contribution Account, and distribution of a Participant’s Employer Divestiture Account shall be made at the same time and in the same manner as provided in the Plan for the distribution of a Participant’s other Accounts in the Plan.  10.04 Forfeiture of Employer Contribution Account.  10.04(1) If a Participant has a Termination of Employment at a time when he has no vested interest in his Employer Contribution Account, the non-vested amount in his Employer Contribution Account shall be forfeited as of the date on which such Participant incurs such Termination of Employment.  10.04(2) If a partially vested Participant has a Termination of Employment and has received a distribution of the vested portion of his Employer Contribution Account and his entire After-Tax Contribution Account, Pre-Tax Contribution Account and Employer Divesture Account, if any, the non-vested amounts in his Employer Contribution Account shall be forfeited as of the date on which such Participant receives such cash-out distribution.  10.04(3) If a partially vested Participant has a Termination of Employment and has not received a distribution of the vested portion of his Employer Contribution Account and his entire After-Tax Contribution Account, Pre-Tax Contribution Account and Employer Divesture Account, if any, the non-vested amounts in his Employer Contribution Account shall be forfeited as of the last day of the Plan Year in which such Participant has incurred five (5) consecutive One-Year Breaks in Service.    50    10.04(4) If a partially vested Participant who has a Termination of Employment and has not received a distribution of the vested portion of his Employer Contribution Account, and his entire After-Tax Contribution Account and Pre-Tax Contribution, is reemployed prior to incurring five (5) consecutive One-Year Breaks in Service, such Participant shall not forfeit the non-vested amounts in his Employer Contribution Account, and the vested amount in his Employer Contribution Account shall be determined in accordance with the provisions of this Article 10 without regard to such Participant’s Termination of Employment.  10.04(5) In the case of any Participant who receives a refund of Excess Contributions pursuant to Subsection 4.05(3)(b) for the Plan Year, such Participant shall forfeit for such Plan Year all Matching Contributions (whether or not vested pursuant to Section 10.01) which relate to and were made on account of amounts refunded under Subsection 4.05(3)(b).  10.04(6) All amounts forfeited as provided in this Section 10.04 and Sections 4.05 and 4.07 are herein referred to as “Forfeitures.” Forfeitures shall first be applied to fund any restorations of Forfeitures pursuant to Section 10.05 or 12.06, then shall be applied to pay administrative expenses, and then shall be applied to reduce each Employer’s Contributions in the proportion that each such Employer’s Contribution for such Plan Year bears to the total of all Employers’ Contributions for such Plan Year.  10.05 Restoration of Forfeited Accounts.  10.05(1) In the event a Participant who has forfeited all or part of his Employer Contribution Account as described in Section 10.04, is reemployed by an Employer prior to the date on which such Participant has incurred five (5) consecutive One-Year Breaks in Service, an amount equal to the value of the forfeited portion of his Employer Contribution Account without adjustment for any gains or losses in the Trust Fund subsequent to the date of such Forfeiture) plus any amount repaid by the Participant (as hereinafter provided) shall be restored to such Participant’s Employer Contribution Account, as appropriate; provided, however, that if such Participant received a distribution, such restoration shall not occur unless and until: (i) such Participant repays to the Plan the full amount of his distribution and (ii) such Participant’s repayment is made before the end of the five (5) year period beginning with the Participant’s Reemployment Date. Upon the restoration of an Employer Contribution Account as provided for herein above, the vested amount in such Employer Contribution Account (whether attributable to amounts restored or additional amounts added to such accounts after such reemployment) shall thereafter be determined in accordance with the provisions of this Article 10 without regard to such Participant’s original Termination of Employment.  10.05(2) The restoration of a Participant’s Employer Contribution Account as provided for in Subsection 10.05(1), shall be made from the Forfeitures which occurred during the Plan Year of such restoration before any use of such Forfeitures as otherwise provided in Subsection 10.04(5). Should such Forfeitures be insufficient to restore the aggregate non-vested amounts owing to any Participant under Subsection 10.05(1), the additional amount necessary for restoration shall be contributed by the Employer employing such Participant as a special contribution to be specially allocated to the Participant’s Employer Contribution Account, as appropriate.    51    ARTICLE 11. - PAYMENT OF BENEFITS  11.01 Method of Payment.  Upon a Participant’s: (i) retirement on or after his Normal Retirement Date; (ii) retirement due to Disability; (iii) death; or (iv) Termination of Employment (subject to Section 4.09); (v) the disposition, to a corporation that is not an Affiliated Company of substantially all of the assets used by the Employer in a trade or business of the Employer as provided in Treasury Regulations, or as otherwise permitted pursuant to Revenue Ruling 2000-27, but only if the Participant continues employment with the transferee corporation, the Employer continues to maintain the Plan and the distribution is in connection with the disposition that causes the Participant’s employment transfer. He or his Beneficiary shall be entitled to payment in an amount determined in accordance with the provisions of Article 7, 8, 9 or 10. Benefits under this Plan will be paid only if the Plan Administrator decides in his discretion that the applicant is entitled to them. All distributions shall be either solely in cash or solely in whole shares of Company Stock (with the value of any fractional share paid in cash) to the extent such Participant’s Account is invested in Company Stock (but not both) as elected by the Participant or his Beneficiary. The amount to which a Participant is entitled shall be paid to him or his Beneficiary or to an Alternate Payee in a single lump sum cash distribution.  A Participant’s Pre-Tax Contributions, Qualified Nonelective Contributions, qualified matching contributions, and earnings attributable to these contributions shall be distributed on account of the Participant’s severance from employment. However, such a distribution shall be subject to the other provisions of the Plan regarding distributions, other than provisions that require a separation from service before such amounts may be distributed.  11.02 Time for Distribution of Benefits. Distribution shall occur in accordance with the following provisions:  11.02(1) Subject to the provisions of this Section 11.02 and Sections 11.01 and 11.03, if a Participant or his Beneficiary is entitled to a distribution pursuant to Article 7, 8, 9, or 10, unless the Participant elects to defer distribution to a later time permitted by Section 11.03, such amounts shall be distributed in a single cash lump sum as soon as administratively possible after the Allocation Date coinciding with or immediately following the date of such Participant’s retirement on or after his Normal Retirement Date, retirement due to total and permanent Disability, death or Termination of Employment, but in no event later than the sixtieth (60th) day after the close of the Plan Year in which occurs the latest of:  (a) The date on which the Participant attains or would have attained sixty-five (65) years of age;  (b) The tenth (10th) anniversary of the year in which the Participant commenced participation in the Plan; or  (c) The date the Participant suffers a Termination of Employment or deaths.    52    11.02(2) Notwithstanding any other provision of this Plan to the contrary, if actual distribution pursuant to Subsection 11.02(1) is delayed for any reason to or beyond the Allocation Date next following the Allocation Date upon which the amount of such distribution was to be based, the distribution shall be based on the balance of the Participant’s Accounts as of the Allocation Date coinciding with or immediately preceding the date on which such distribution is made.  11.02(3) Notwithstanding the provisions of Subsection 11.02(1), and subject to Section 11.03, if a Participant has a Termination of Employment or retires due to Disability and his vested Account at such time exceeds Five Thousand ($5,000), the amounts owing to such Participant shall be distributed in a single lump sum as soon as administratively possible after such Participant attains age sixty-five (65) or dies, unless such Participant has delivered to the Plan Administrator his consent, in such form as prescribed by the Plan Administrator, to a distribution at an earlier time.  11.02(4) If, upon Termination of Employment for any reason, or, when distributions are required to commence to a Participant pursuant to Subsection 11.03(1), the value of the vested portion of a Participant’s Account is Five Thousand Dollars ($5,000) or less and has never at any time prior exceeded Five Thousand Dollars ($5,000), then his Account shall be paid to or for the benefit of the Participant, or in the case of his death, to or for the benefit of his Beneficiary or Beneficiaries, as a lump sum payment as soon as administratively feasible.  11.03 Limitations on Timing. Notwithstanding any other provision of the Plan to the contrary, distributions must occur at least as rapidly as required under this Section 11.03.  11.03(1) Distribution of a Participant’s entire interest in the Plan shall commence to be distributed to him no later than the Required Beginning Date, and at the Participant’s election shall be fully distributed in a lump sum, based on the balance in his Account as of the Allocation Date coinciding with or immediately preceding the Required Beginning Date.  11.03(2) In the event of the death of a Participant prior to distribution of his benefits under the Plan, distribution of such deceased Participant’s entire interest under the Plan shall be made within five (5) years after the death of such Participant.  11.03(3) Notwithstanding any plan provision herein to the contrary with respect to distributions made on or after January 1, 2001, the Plan will apply the minimum distribution requirements of Code section 401(a)(9) in accordance with the regulations thereunder, that were proposed on January 12, 2001. This provision shall continue in effect until the last day of the last calendar year beginning before the effective date of final; regulations under Code section 401(a)(9) or such other date as may be specified in guidance published by the Internal Revenue Service.  11.03(4) In the event a Participant dies after benefit payments to such Participant have commenced under the Plan, the benefits, if any, to which such deceased Participant’s Beneficiary is entitled under the method of payment in effect at the time of such Participant’s death shall be distributed at least as rapidly as under such method of payment.  11.04 Restrictions on Distribution. Notwithstanding the foregoing provisions of Article 11, the Plan shall not distribute any Company Stock acquired with the proceeds of an Exempt Loan until the close of the Plan Year in which such Exempt Loan has been repaid in full.    53    11.05 Payments on Personal Receipt Except in Case of Legal Disability. All payments to any Participant, Beneficiary or Alternate Payee from the Trust Fund shall be made to the recipient entitled thereto in person or upon his personal receipt, in a form satisfactory to the Plan Administrator, except when the recipient entitled thereto shall be under a legal disability, or, in the sole judgment of the Plan Administrator, shall otherwise be unable to apply such payments in furtherance of his own interests and advantage. The Plan Administrator may, in such event, in its sole discretion, direct all or any portion of such payments to be made in any one or more of the following ways: (i) directly to such person, (ii) to the guardian of his person or of his estate, even though appointed by a court other than a Texas state court, (iii) to his spouse or to any other person, to be expended for his benefit, or (iv) to a custodian under any applicable Uniform Gifts to Minors Act or Uniform Transfers to Minors Act. The decision of the Plan Administrator, in each case, will be final, binding and conclusive upon all persons ever interested hereunder, and the Plan Administrator shall not be obliged to see to the proper application or expenditure of any payments so made. Any payment made pursuant to the power herein conferred upon the Plan Administrator shall operate as a complete discharge of all obligations of the Trustee and the Plan Administrator, to the extent of the amounts so paid.  11.06 Benefits Payable Pursuant to a Qualified Domestic Relations Order. Notwithstanding any other provision of the Plan to the contrary, immediate distribution of benefits payable to an Alternate Payee pursuant to a Qualified Domestic Relations Order shall be permitted even though the Participant whose benefits have been assigned to the Alternate Payee would not be entitled to receive a distribution at such time, if all of the following requirements are met: (i) the Participant’s Account is one hundred percent (100%) vested; (ii) the entire amount payable to the Alternate Payee does not exceed Five Thousand Dollars ($5,000), or the Alternate Payee has requested immediate distribution in such form as prescribed by the Plan Administrator; (iii) allocation pursuant to Section 6.04 of all amounts required to be paid to the Alternate Payee has been completed; (iv) the Qualified Domestic Relations Order requires or permits immediate distribution; and (v) the conditions of Subsection 11.01(1) as to form of payment are met.  In the event an Alternate Payee dies prior to distribution of the amounts payable to the Alternate Payee pursuant to the Qualified Domestic Relations Order, the amount payable shall be distributed as provided in the Qualified Domestic Relations Order. If the Qualified Domestic Relations Order does not specify how such amounts are to be distributed in the event of the Alternate Payee’s death, the Plan Administrator shall cause such amounts to be distributed to a Beneficiary designated by the Alternate Payee or if no Beneficiary has been designated, in accordance with Subsection 9.02(1) (by substituting Alternate Payee for Participant whenever such term appears in that Section).  11.07 Direct Rollovers.  11.07(1) Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee from making an election under this Section, a Distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover to the extent that such Eligible Rollover Distribution is at least $200 (or is reasonably expected to total at least $200 when aggregated with other distributions during the Plan Year from this Plan). The procedures prescribed by the Plan Administrator may include a deadline for making such an election and may require the Distributee to furnish adequate information regarding the     54     Eligible Retirement Plan specified by the Participant in a Direct Rollover. Such procedures may also require the Direct Rollover of at least $500 as a condition of permitting Direct Rollover of less than the total distribution and may limit Participants to a single Direct Rollover.  11.07(2) Definitions.  (a) Eligible Rollover Distribution. An Eligible Rollover Distribution is any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Participant and the Distributee’s designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Code section 401(a)(9); the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities); any hardship distribution described in Section 401(k)(2)(B)(i)(IV) of the Code.  Any amount that is distributed on account of hardship shall not be an Eligible Rollover Distribution and the distributee may not elect to have any portion of such a distribution paid directly to an Eligible Retirement Plan.  A portion of a distribution shall not fail to be an Eligible Rollover Distribution merely because the portion consists of After-Tax Contributions which are not includible in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in section 408(a) or (b) of the Code, or to a qualified defined contribution plan described in section 401(a) or 403(a) of the Code that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible.  (b) Eligible Retirement Plan. An “Eligible Retirement Plan” is an individual retirement account described in Code section 408(a), an individual retirement annuity described in Code section 408(b), an annuity plan described in Code section 403(a), or a qualified trust described in Code section 401(a) that accepts the distributees Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to the surviving spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity.  An Eligible Retirement Plan shall also mean an annuity contract described in section 403(b) of the Code and an eligible plan under section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan. The definition of Eligible Retirement Plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the alternate payee under a qualified domestic relation order, as defined in section 414(p) of the Code.  (c) Distributee. A “Distributee” includes an Employee or former Employee. In addition, the Employee’s or former Employee’s surviving spouse and the Employee’s or former Employee’s spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Code section 414(p), are Distributees with regard to the interest of the spouse of former spouse.    55    (d) Direct Rollover. A “Direct Rollover” is a payment by the Plan to the Eligible Retirement Plan specified by the Distributee.  11.07(3) Such distribution may commence less than thirty (30) days but no less than seven (7) days after the notice required under Treasury Regulations Sections 1.411(a)-11(c) is given, provided that:  (e) the Plan Administrator clearly informs the participant that the participant has a right to a period of at least thirty (30) days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and  (f) the Participant, after receiving the notice, affirmatively elects a distribution.    56    ARTICLE 12. - MISCELLANEOUS PROVISIONS RESPECTING PARTICIPANTS  12.01 Participants to Furnish Required Information.  12.01(1) Each Participant shall furnish to the Plan Administrator such information as the Plan Administrator considers necessary or desirable for purposes of administering the Plan, and the provisions of the Plan respecting any payments hereunder are conditional upon the Participant’s furnishing promptly such true, full, and complete information as the Plan Administrator may reasonably request.  12.01(2) Each Participant shall submit proof of such Participant’s age to the Plan Administrator. The Plan Administrator shall, if such proof of age is not submitted as required, use as conclusive evidence thereof, such information as is deemed by it to be reliable, regardless of the source of such information. Any adjustment required by reason of lack of proof or the misstatement of the age of persons entitled to benefits hereunder, by the Participant or otherwise, shall be in such manner as the Plan Administrator deems equitable.  12.03(3) Any election, notice, or information which according to the terms of the Plan or the rules of the Plan Administrator must be filed with the Plan Administrator, shall be deemed so filed if addressed and either delivered in person, delivered by electronic transmission, or mailed, postage fully prepaid, to the Plan Administrator. Whenever a provision herein requires that a Participant (or the Participant’s Beneficiary) give notice to the Plan Administrator or make an election within a specified number of days or by a certain date, and the last day of such period, or such date, falls on a Saturday, Sunday or Employer holiday, the Participant (or the Participant’s Beneficiary) will be deemed in compliance with such provision if notice is delivered in person to the Plan Administrator, delivered by electronic transmission, or is mailed, properly addressed, postage prepaid, and postmarked on or before the business day next following such Saturday, Sunday or Employer holiday. The Plan Administrator may, in its sole discretion, modify or waive any specified notice requirement; provided, however, that such modification or waiver must be administratively feasible, must be in the best interest of the Participant, and must be made on the basis of the rules of the Plan Administrator which are applied uniformly to all Participants.  12.02 Participants’ Rights in Trust Fund. No Participant or other person shall have any right, title or interest in, to or under the Trust Fund, or any part of the assets thereof, except and to the extent expressly provided in the Plan.  12.03 Inalienability of Benefits.  12.03(1) Restrictions on Assignment. The benefits provided hereunder are intended for the personal security of persons entitled to payment under the Plan, and are not subject in any manner to the debts or other obligations of the persons to whom they are payable. The interest of a Participant or such Participant’s Beneficiary or Beneficiaries may not be sold, transferred, assigned, or encumbered in any manner, either voluntarily or involuntarily, and any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be null and void; neither shall the Trust Fund nor any benefits thereunder or hereunder be liable for or subject to the debts, contracts, liabilities, engagements, or torts of any person to whom such benefits or funds     57     are payable, nor shall they be subject to garnishment, attachment, or other legal or equitable process nor shall they be an asset in bankruptcy. All of the provisions of this Section 12.03, however, are subject to Section 11.03, to withholding of any applicable taxes and to assignments permitted by Code section 401(a)(13).  12.03(2) Exception for Benefit Payable pursuant to a Qualified Domestic Relations Order.  (a) The prohibitions contained in Subsection 12.03(1) shall not apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a Participant pursuant to a Qualified Domestic Relations Order.  (b) The Plan Administrator shall establish written procedures for the determination of the qualified status of a domestic relations order.  (c) Upon receiving a domestic relations order, the Plan Administrator shall notify the Participant and Alternate Payee named in the order, in writing, of the receipt of the order and the Plan’s procedures for determining the qualified status of the order. Within a reasonable period of time after receiving the domestic relations order, the Plan Administrator shall determine the qualified status of the order and shall notify the Participant and the Alternate Payee, in writing, of its determination. The Plan Administrator shall provide notice under this paragraph by mailing such notice to the individual’s address specified in the domestic relations order, or in a manner consistent with Department of Labor regulations.  (d) During any period in which the issue of whether a domestic relations order is a Qualified Domestic Relations Order is being determined, notwithstanding any other provision of the Plan to the contrary, the Plan Administrator shall segregate in a separate account the amounts which would have been payable during such period to an Alternate Payee pursuant to a Qualified Domestic Relations Order, if such order had been determined to be a Qualified Domestic Relations Order. During the period such amounts are segregated in a separate account under the Plan, such amounts shall remain subject to the general investment provisions of the Plan. If within the eighteen (18) month period beginning with the date on which the first payment would be required to be made under such domestic relations order, the domestic relations order is determined to be a Qualified Domestic Relations Order, the Plan Administrator shall direct the Trustee to distribute to the Alternate Payee the segregated amounts including any earnings and appreciation (or losses and depreciation) thereon in accordance with Section 11.05 and such domestic relations order. However, if within such eighteen (18) month period, it is determined that such order is not qualified, or the issue of qualification is not resolved, then the Plan Administrator shall pay the segregated amounts, including any earnings and appreciation (or losses and depreciation) thereon, to the person or persons who would have been entitled to such amounts if there had been no such order.  (e) Notwithstanding any other provision of the Plan to the contrary, all rights and benefits, including rights to make elections or to give directions, provided to a Participant under this Plan shall be subject to the rights, benefits and elections or directions afforded to an Alternate Payee, pursuant to a Qualified Domestic Relations Order, and this Plan shall be interpreted and administered by the Plan Administrator in such manner as to effectuate the provisions of any such Qualified Domestic Relations Order as it relates to the rights, benefits, and elections or directions afforded to such Alternate Payee under such Qualified Domestic Relations Order.     58     Furthermore, to the extent provided in any such Qualified Domestic Relations Order, a former spouse of a Participant shall be treated as a spouse or surviving spouse for all applicable purposes under the Plan.  The Trustee shall make any payments or distributions required under this Subsection 12.03(2) by separate benefit checks or other separate distribution to the Alternate Payee(s).  12.04 Conditions of Employment Not Affected by Plan. Neither the Plan nor the Trust nor the Trust Agreement shall confer on any Employee, including any Participant, any right to be retained in the service of any Employer, and nothing contained herein or in the Trust Agreement shall be construed in any way to limit or restrict the right of any Employer to discharge any Employee, regardless of whether such Employee is a Participant, or to change such Employee’s position or the basis or amount of such Employee’s compensation.  12.05 Address for Mailing of Benefits.  12.05(1) Each Participant and each other person entitled to benefits hereunder shall file with the Plan Administrator from time to time in such form as prescribed by the Plan Administrator such Participant’s post office address and each change of address. Any check representing payment hereunder and any communication addressed to a Participant, an Employee, or Beneficiary, at such person’s last address filed with the Plan Administrator, or if no such address has been filed, then at such person’s last address as indicated on the records of an Employer, shall be deemed to have been delivered to such person on the date on which such check or communication is deposited, postage prepaid, in the United States mail.  12.05(2) If the Plan Administrator is in doubt as to whether payments are being received by the person entitled thereto, it shall, by registered mail addressed to the person concerned, at his address last known to the Plan Administrator, notify such person that all unmailed and future payments shall be withheld until he provides the Plan Administrator with a sworn statement, properly notarized, evidencing his continued life and his proper mailing address.  12.06 Unclaimed Account Procedure.  12.06(1) Neither the Trustee nor the Plan Administrator shall be obliged to search for, or ascertain the whereabouts of any Participant, Beneficiary, or Alternate Payee. Upon the return of a distribution check, the Plan Administrator, by certified or registered mail addressed to such Participant’s, Beneficiary’s, or Alternate Payee’s last known address, shall notify the Participant, Beneficiary, or Alternate Payee that such Participant, Beneficiary, or Alternate Payee is entitled to a distribution under this Plan.  12.06(2) Any distribution or payment which is not claimed by the person entitled thereto within six (6) months from the date the certified or registered letter is sent to the individual shall be forfeited. Any distribution check which is not cashed within six (6) months from its date of issuance shall be void and the amount thereof forfeited. Such forfeited amounts shall be added to Forfeitures. Should such person make a claim for such forfeited benefit, at any time prior to termination of the Plan and final distribution thereunder, which is approved by the Plan     59     Administrator, such benefit shall be restored as follows: An amount equal to the amount previously forfeited (but without interest on such amount for the period from the date of such forfeiture to the date of such restoration) shall be specially allocated from Forfeitures in the current Plan Year for the benefit of such Participant or Beneficiary. Immediately upon allocation to such Participant or Beneficiary, the Plan Administrator shall instruct the Trustee to distribute in a lump sum, directly to such Participant or Beneficiary, the amount specially allocated to such Participant or Beneficiary.  12.06(3) In the event of Plan termination, amounts that were forfeited pursuant to the provisions of Subsection 12.06(2) which exceeded Five Thousand Dollars ($5,000) or were otherwise distributable without Participant consent, shall be considered lost. If the period of time since forfeiture for such lost benefits exceeds the applicable state escheat period, the forfeiture shall become permanent upon Plan termination. All other amounts forfeited pursuant to Subsection 12.06(2) shall be reinstated as of the Plan’s termination date.  12.07 No Rollovers. No rollovers shall be accepted.    60    ARTICLE 13. - ADMINISTRATION OF THE PLAN  13.01 Plan Administrator. The administration of the Plan will be the responsibility of the Plan Administrator which shall be the Company.  13.02 Compensated Expenses of the Plan Administrator. The Plan Administrator shall serve without compensation for its services as such, but the reasonable and necessary expenses of the Plan Administrator shall be paid by the Trust Fund unless paid by the Employers as provided in Section 13.15. When, in its discretion, the Plan Administrator, or any Employer, deems it advisable, the Plan Administrator shall be authorized to have the records of the Plan Administrator and the Trustee audited by an independent auditor, and reasonable and necessary expenses thereby incurred shall be paid by the Trust Fund unless paid by the Employers, as provided in Section 13.15.  13.03 Agents of the Plan Administrator. The Plan Administrator may employ such agents and such clerical and other administrative personnel as reasonably may be required for the purpose of administering the Plan. Such administrative personnel shall carry out the duties and responsibilities assigned to them by the Plan Administrator. Reasonable expenses necessarily incurred for such purpose shall be paid by the Trust Fund unless paid by the Employers, as provided in Section 13.15.  13.04 Reliance on Directions of Plan Administrator. The Plan Administrator shall give to the Trustee any order, direction, consent, certificate, or advice required or permitted under the terms of the Plan or Trust Agreement, and the Trustee shall be entitled to rely on, as evidencing the action of the Plan Administrator, any instrument delivered to the Trustee when: (i) if a resolution, it is certified by the Secretary of the Board; or (ii) if a memorandum, it is signed by a person who shall have been authorized to act for the Plan Administrator in respect of the subject matter thereof.  13.05 Authority of Plan Administrator. The Plan Administrator is authorized to take such actions as may be necessary to carry out the provisions and purposes of the Plan and shall have the authority to control and manage the operation and administration of the Plan. In order to effectuate the purposes of the Plan, the Plan Administrator shall have the discretionary power to construe and interpret the Plan, to supply any omissions therein, to reconcile and correct any errors or inconsistencies, to decide any questions in the administration and application of the Plan, to recover in any manner authorized by law any payments erroneously or wrongfully made from the Plan to Participants or any other person or entity, and to make equitable adjustments for any mistakes or errors made in the administration of the Plan. All such actions or determinations made by the Plan Administrator, and the application of rules and regulations to a particular case or issue by the Plan Administrator, in good faith, shall not be subject to review by anyone, but shall be final, binding, and conclusive on all persons ever interested hereunder. In construing the Plan and in exercising its power under provisions requiring Plan Administrator approval, the Plan Administrator shall attempt to ascertain the purpose of the provisions in question and when such purpose is known or reasonably ascertainable, such purpose shall be given effect to the extent feasible. Likewise, the Plan Administrator is authorized to determine all questions with respect to the individual rights of all Participants and their Beneficiaries and Alternate Payees under this Plan, including, but not limited to, all issues with respect to eligibility, Compensation, service, valuation of Accounts, allocation of consolidated contributions and Trust Fund earnings, and retirement or Termination of Employment, and shall direct the Trustee concerning the allocation, payment and distribution of all funds held in     61     trust for purposes of the Plan. The Plan Administrator, in the exercise of any discretionary powers hereunder, shall not exercise that discretion so as to discriminate in favor of Highly Compensated Employees. The Plan Administrator shall establish investment objectives and monitor, or cause to be monitored, the investment performance of the Trustee or any Investment Manager which may be appointed with respect to any assets of the Plan.  13.06 Authorization of Loan Transactions. Upon directions from the Board, the Plan Administrator shall have the authority to direct the Trustee to borrow funds to purchase Company Stock. Upon directions from the Board, the Plan Administrator shall consult with the Trustee concerning the source of the borrowed funds, the terms of the loan agreement, and the provision of collateral. The Board may empower the Plan Administrator to authorize the guarantee or making by the Company of any such loan. Any loan made by or guaranteed by the Company or which involves a disqualified person (as defined in Section 4975(e)(2) of the Code) shall comply with all applicable requirements of Section 4975(d)(3) of the Code and regulations issued thereunder in order that the extension of credit shall be exempt from excise taxes imposed with respect to prohibited transactions under Section 4975 of the Code and any liability imposed by Section 406 of ERISA. From time to time at the Board’s direction, the Plan Administrator may direct the Trustee to enter into loan arrangements and purchase additional Company Stock and may direct the Trustee to refinance previous loans.  13.07 General Administrative Powers. The Plan Administrator shall have authority to make, and from time to time, revise, rules and regulations for the administration of the Plan.  13.08 Additional Powers. The Plan Administrator shall exercise such authority and responsibility as it deems appropriate to comply with the provisions of federal law and governmental regulations issued thereunder, including, but not limited to, records of Participants’ service, accrued benefits and the percentage of such benefits which are nonforfeitable under the Plan, notification to Participants, annual registration with the Internal Revenue Service, annual reports to the Department of Labor, and furnishing the Trustee with any directions or information regarding income tax withholding required by law. The Plan Administrator is hereby designated as the agent for service of process unless the Plan Administrator designates another person or entity.  13.09 Duties of Administrative Personnel. Administrative personnel appointed pursuant to Section 13.03, shall be responsible for such matters as the Plan Administrator shall delegate to them by written instrument, including, but not limited to communications to Employees at the direction of the Plan Administrator, reports to the Plan Administrator involving questions of eligibility and the amount of Compensation of Participants, assisting Participants, Beneficiaries and Alternate Payees in the completion of forms prescribed by the Plan Administrator, and maintenance of records concerning terminated vested Participants, Participants who have retired and Beneficiaries. Administrative personnel may not make any decision as to Plan policy, interpretations, practices or procedures unless the authority to make such decisions has been delegated to them in writing by the Plan Administrator and they accept fiduciary responsibilities in accordance with the provisions of Section 13.10. All administrative personnel shall perform their allocated function within the policies, interpretations, rules, practices and procedures established by the Plan Administrator, except that administrative personnel shall coordinate matters related to the Plan with the appropriate departments of each Employer as the Plan Administrator directs.    62    13.10 Designation of Named Fiduciaries and Allocation of Responsibility. ERISA requires that certain persons, who are deemed to be “fiduciaries,” as defined in ERISA Section 3(21)(A), be designated as “Named Fiduciaries” in the Plan. The Company, the Plan Administrator, and the Trustees are hereby designated Named Fiduciaries. Each Named Fiduciary shall have only the powers, duties and responsibilities specifically allocated to such fiduciary pursuant to the terms of this Plan and the Trust. Each Named Fiduciary may, by written instrument, allocate some or all of its responsibilities to another fiduciary or designate another person to carry out some or all of its fiduciary responsibilities. Each fiduciary under the Plan (including fiduciaries to whom responsibilities are allocated by a Named Fiduciary) will be furnished a copy of the Plan, and their acceptance of such responsibility will be made by agreeing in writing to act in the capacity designated. No Named Fiduciary shall be liable for an act or omission of any person who is allocated a fiduciary responsibility or who is designated to carry out such responsibility by a Named Fiduciary, except to the extent that the Named Fiduciary did not act in accordance with the standards contained in Subsection 13.11(2) with respect to the allocation or designation of a fiduciary duty. Any person or group of persons may serve in more than one (1) fiduciary capacity with respect to the Plan.  13.11 Action by Fiduciaries.  13.11(1) Any action herein permitted or required to be taken by an Employer shall, subject to the provisions of Section 20.07, be by resolution of its Board or by written instrument signed by a person or group of persons who has been authorized by resolution of such Board as having authority to take such action.  13.11(2) Each fiduciary with respect to the Plan shall perform all of his duties and responsibilities and exercise his powers hereunder with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims, and no fiduciary shall be liable for any act or failure to act on his part (including reliance on the advice of counsel) which conforms to that standard, unless: (i) he knowingly participates in or knowingly undertakes to conceal an act or omission of another fiduciary of the Plan, with the knowledge that such act or omission is a breach of fiduciary responsibility; (ii) knowing of a breach of fiduciary responsibility, he fails to make reasonable efforts under the circumstances to remedy the breach; or (iii) by failing to carry out his specific responsibilities, in accordance with such standard, he has enabled another fiduciary of the Plan to commit a breach.  13.11(3) Each fiduciary shall furnish or cause to be furnished to each other fiduciary all information needed for the proper performance of its duties. Each fiduciary warrants that any directions given, information furnished or action taken by it shall be in accordance with the provisions of the Plan or the Trust Agreement, as the case may be, authorizing or providing for such direction, information or action.  13.12 Appointment of Professional Assistants and the Investment Manager. A Named Fiduciary may appoint such accountants, counsel, and actuaries and other advisers as it deems necessary or desirable in connection with the administration of the Plan. A Named Fiduciary shall be entitled to rely upon and shall not be liable for any act or failure to act in reliance, on any opinion or reports, which shall be furnished to such Named Fiduciary by any such accountant with respect to accounting matters, counsel in respect to legal matters, or actuary in respect of actuarial matters as long as the Named Fiduciary’s reliance is in accordance with the standard set forth in Subsection 13.11(2). The fees and costs of such services are an administrative expense to the Plan to be paid out of the Trust Fund except to the extent that Employers elect to pay such fees and costs.    63    13.13 Bond. The Plan Administrator shall see that the appropriate fiduciaries are bonded as required by federal law or regulation. Except as required by the Board or by state or federal statute, irrespective of this provision, no bond or other security shall be required of any fiduciary.  13.14 Indemnification. In the event and to the extent not insured against under any contract of insurance with an insurance company, the Employers shall indemnify and hold harmless each “Indemnified Person” as defined below, against any and all claims, demands, suits, proceedings, losses, damages, interest, penalties, expenses, (specifically including, but not limited to reasonable counsel fees, court costs and other reasonable expenses of litigation), and liability of every kind, including amounts paid in settlement, with the approval of the Board, arising from any action or cause of action related to the Indemnified Person’s act or acts or failure to act. Such indemnity shall apply regardless of whether such claims, demands, suits, proceedings, losses, damaged, interest, penalties, expenses, and liability arise in whole or in part from: (i) the negligence or other fault of the Indemnified Person, except when the same is judicially determined to be due to gross negligence, fraud, or willful or intentional misconduct of such Indemnified Person; or (ii) from the imposition on such Indemnified Person of any penalties imposed by the Secretary of Labor, pursuant to ERISA Section 502(1), relating to any breaches of fiduciary responsibility under Part 4 of Title I of ERISA.  “Indemnified Person” shall mean each member of the Board, the Plan Administrator, each individual Trustee, and each other Employee who is allocated fiduciary responsibility hereunder. Upon request by the Indemnified Person, and at such other times as may be determined by the Plan Administrator, any indemnification due under this Section shall be made as the loss or expense as incurred. Payments under this Section may be made directly to a third party at the direction of the Board or the Indemnified Person. In the event the Plan Administrator subsequently determines that a payment based upon an initial determination of the applicability of this Section was inadvertently made, the Indemnified Person on whose behalf such payment was made shall reimburse the Employers to the extent required to satisfy the terms of this Section. The indemnification provisions of this Section shall not relieve any person from any liability he may have under ERISA for breach of fiduciary duty.  This Section shall not be deemed to restrict, limit or supersede any indemnification provided pursuant to the Company’s by-laws, the Trust Agreement, or any other written agreement.  13.15 Payment of Expenses. The expenses of agents or advisers, and any other reasonable expenses of the Plan Administrator, shall be paid or reimbursed by the Trustee out of the Trust Fund unless paid by the Employers. Such expenses shall be paid first from Forfeitures. To the extent permitted by ERISA, the Trustee may also reimburse an Employer for reasonable and necessary direct expenses incurred for administration of the Plan.    64    ARTICLE 14. - PARTICIPATION BY EMPLOYERS  14.01 Adoption of Plan by Affiliated Company. Any Affiliated Company, whether or not presently existing, may adopt this Plan with the consent of the Company. Adoption by an Affiliated Company shall be accomplished in such manner as is specified by the Company from time to time. With the approval of the Company, an Affiliated Company may adopt the Plan with such modifications as it specifies in its instrument of adoption.  14.02 Rights and Obligations of the Company and the Employers. Throughout this instrument, a distinction is purposely drawn between rights and obligations of the Company and rights and obligations of each other Employer. The rights and obligations specified as belonging to the Company shall belong only to the Company. Each Employer (other than Operations Company for Homestead, Inc.) with respect to its Employees who are eligible to participate in the Homestead Retirement Plan) shall have the obligation, as herein provided, to make Matching Contributions and Discretionary Contributions for its own Participants, and no Employer shall have the obligation to make Matching Contributions or Discretionary Contributions for the Participants of any other Employer. Any failure by an Employer to fulfill its own obligations under this Plan shall have no effect upon any other Employer. An Employer may withdraw from this Plan without affecting any other Employer.  14.03 Withdrawal from Plan. Any Employer may withdraw from the Plan upon giving the Company and the Trustee at least sixty (60) days’ notice in writing of its intention to withdraw. Such withdrawal shall terminate all obligations of the withdrawn Employer under the Plan, but, except as otherwise provided by the Company in its sole discretion, the Accounts of such Employers’ Employees shall remain in the Trust until otherwise payable to the Participants.    65    ARTICLE 15. - AMENDMENT OF THE PLAN  The Company reserves the right to amend the Plan with respect to all Employers at any time and from time to time. Unless otherwise permitted by law, no amendment shall permit any part of the Trust Fund to revert to or be recoverable by an Employer or be used for or diverted to purposes other than the exclusive benefit of the Participants or their Beneficiaries, or deprive any Participant of any interest he might have in the Trust Fund at the time of the amendment to the extent that such interest would be available to the Participant under Article 10 were he to voluntarily resign as of the effective date of the amendment.  (a) Under no condition, shall such amendment, amendments, or restatements increase the duties or responsibilities, or decrease the compensation, privileges, and immunities of the Trustee without the Trustee’s written consent.  (b) Under no condition, shall such amendment change the vesting schedule to one which would result in the nonforfeitable percentage of the accrued benefit derived from Matching Contributions or Discretionary Contributions (determined as of the later of the date of the adoption of the amendment or of the effective date of the amendment) of any Participant being less than such nonforfeitable percentage computed under the Plan without regard to such amendment; provided, however, that no amendment shall change the vesting schedule unless each Participant with three (3) or more Vesting Years of Service, is permitted to elect, within the election period described below, to have his nonforfeitable percentage computed under the Plan without regard to the amendment. The election period described herein shall begin no later than the date upon which the amendment is adopted and shall end no later than the latest of the following dates: (i) the date which is sixty (60) days after the day the amendment is adopted; (ii) the date which is sixty (60) days after the day the amendment becomes effective; or (iii) the date which is sixty (60) days after the day the Participant is issued a written notice of the amendment by the Company.  (c) Subject to the above stated limitations and the requirement that no amendment shall eliminate (except with respect to any future contributions or future accrual of benefits and except as otherwise permitted by Treasury Regulations or rulings) any nondiscretionary optional form of payment as provided in Treasury Regulations Section 1.411(d)-4 and Code section 411(d)(6), with respect to any Participant who is a Participant immediately prior to the amendment, the Company shall have the power to amend the Plan and Trust Agreement, retroactively or otherwise, in any manner in which it deems desirable, including, but not by way of limitation, the power to change any provisions relating to the administration of the Plan and Trust Fund, and to change any provisions relating to the benefits or payment of any of the assets of the Trust Fund. Each such amendment shall become effective when executed by the Company unless a different effective date is specified in the amendment.  (d) Notwithstanding anything herein to the contrary, this Plan may be amended at any time by the Company if necessary or desirable in order to have it conform to the provisions and requirements of the Code or any other applicable law, and no such amendment shall be considered prejudicial to the rights of any Participant hereunder or of any Beneficiary, Alternate Payee, or Employee. Further, it is understood that any provisions of this Plan as herein contained which are contrary to the requirements of the Code for a qualified tax exempt employees’ stock bonus plan and trust shall be deemed void and of no effect, without affecting the validity of other provisions hereof.    66    ARTICLE 16. - PERMANENCY OF THE PLAN  16.01 Right to Terminate Plan. The Company contemplates that the Plan shall be permanent and that the Employers shall be able to make contributions to the Plan. Nevertheless, in recognition of the fact that future conditions and circumstances cannot now be entirely foreseen, the Company reserves the right to terminate the Plan.  16.02 Merger or Consolidation of Plan and Trust. Neither the Plan nor the Trust may be merged or consolidated with, nor may its assets or liabilities be transferred to, any other plan or trust, unless each Participant would (if the Plan then terminated) receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer (if the Plan had then terminated). The Plan Administrator is empowered to direct the Trustee to transfer assets and liabilities from the Plan relating to such Participant Accounts as the Plan Administrator designates to another plan, such transfer must meet the requirements of Code section 414, and trust-to-trust transfer under this Section 16.02 shall only be made in cash.  16.03 Continuance by Successor Company. Subject to approval of the Board, in the event of the liquidation, dissolution, merger, consolidation, or reorganization of an Employer, the successor company may, with the approval of the Company, adopt the Plan and Trust for the benefit of the Employees of such Employer. If such successor company does adopt the Plan and Trust, it shall, in all respects, be substituted for such Employer under the Plan and Trust. Any such substitution of such successor company shall constitute an assumption of Plan liabilities by such successor company, and such successor company shall have all of the powers, duties and responsibilities of such Employer under the Plan and Trust. If such successor company does not adopt the Plan and Trust, participation in the Plan and Trust shall cease with respect to such Employer in accordance with the provisions of the Plan and Trust Agreement and the assets of the successor company’s employees shall be held or distributed as directed by the Board.    67    ARTICLE 17. - DISCONTINUANCE OF CONTRIBUTIONS AND TERMINATION  17.01 Suspension of Contributions. Should an Employer fail to make Matching Contributions in any one (1) or more years, such failure shall not, of itself, terminate or discontinue this Plan and Trust as to the Employer and its Participants, nor shall the Employer incur any obligation to resume its Matching Contributions in whole or in part.  17.02 Discontinuance of Contributions. Whenever an Employer determines that it is impossible or inadvisable for it to make further Matching Contributions, such Employer may without terminating the Trust, permanently discontinue all further Matching Contributions by such Employer. A certified copy of such Employer’s resolution or other formal written instrument pursuant to Section 20.06, shall be delivered to the Plan Administrator and the Trustee. Thereafter, the Plan Administrator and the Trustee shall continue to administer all the provisions of the Plan which are necessary and remain in force, other than the provisions relating to Matching Contributions by such Employer. Unless otherwise provided by the Company, the Trust shall remain in existence with respect to such Employer and all of the provisions of the Trust Agreement shall remain in force.  17.03 Termination of Plan and Trust. If the Company determines to terminate the Plan and Trust completely, it shall be terminated as of the date specified in certified copies of resolutions or other formal written instrument pursuant to Section 20.06, delivered to the Trustee. The Company shall direct the Trustee whether to continue to hold assets of the Plan pending distribution to Participants and Beneficiaries at the times provided in Article 11, or to liquidate and distribute assets of the Plan as hereinafter provided. Upon such termination of the Plan and Trust and before liquidation of the Trust, the Trustee shall do a special valuation of the Trust, if the liquidation is not to occur as of an Allocation Date. After payment of all expenses and proportional adjustment of Accounts of Participants to reflect such expenses, Trust Fund profits or losses, and subject to the limitations contained in Section 5.04, allocations of any previously unallocated funds to the date of termination, Participants shall be entitled to receive the amount then credited to their respective Accounts in the Trust Fund in accordance with Article 11. If, in the opinion of the Plan Administrator, assets in the Trust Fund or certain of them may possibly not be readily salable (i) because of federal or state securities laws, or the rules and regulations thereunder or (ii) at a fair value, the Plan Administrator shall direct and the Trustee shall effect, a distribution of such assets in kind. Upon completion of liquidation and distribution of the assets of the Trust to the Participants, the Trustee shall thereby complete the Trustee’s duties, and the Trust shall terminate.  17.04 Participant’s Rights to Benefits upon Termination or Partial Termination of Plan or Complete Discontinuance of Contributions. Upon the termination or partial termination (as determined by the Internal Revenue Service) of the Plan or the complete discontinuance of Matching Contributions, the rights of affected Participants with respect to the amounts credited to their Accounts at such time shall be nonforfeitable without reference to any formal action on the part of such Employer, the Plan Administrator, or the Trustee.  ARTICLE 18. - EXCLUSIVE BENEFIT OF THE PLAN  18.01 Limitation on Reversions. Except as otherwise provided in this Article 18, it shall be impossible, at any time, for any part of the Trust Fund, other than such part as is required to pay taxes     68     and administration expenses or such part as may otherwise be permitted by law to be returned to the Employer, to be recoverable by an Employer, or to be used for, or diverted to, purposes other than for the exclusive benefit of the Participants, Beneficiaries, and Alternate Payees.  18.02 Unallocated Amounts upon Termination of Plan and Trust. In the event the Plan and Trust are terminated, any previously unallocated amounts maintained in the suspense account in accordance with the provisions of Subsection 5.06(3) which cannot be allocated to Participants upon the termination of the Plan and Trust pursuant to Section 17.03 because of the limitations contained in Sections 5.07 through 5.08, shall revert to the Employer or Employers employing the Participant at the time of such termination.  18.03 Mistake of Fact or Disallowance of Deduction. If the Plan Administrator in good faith determines that (a) a Discretionary Contribution, a Matching Contribution or Pre-Tax Contribution was made by reason of a mistake of fact or (b) a Discretionary Contribution, a Matching Contribution or Pre-Tax Contribution is conditioned on its being deductible under Code section 404, but the Internal Revenue Service disallows such deduction, the amount of the excess Discretionary Contribution, Matching Contribution or Pre-Tax Contribution less losses attributable thereto may, upon direction of the Plan Administrator, be returned to the contributing Employer. All payments of returned Discretionary Contribution, Matching Contributions or Pre-Tax Contributions under this Section shall be made within one (1) year from the date of the payment of such mistaken Discretionary Contribution, Matching Contribution or Pre-Tax Contribution or the disallowance by the Internal Revenue Service of the deduction, whichever is applicable. The amount of the excess Discretionary Contribution, Matching Contribution or Pre-Tax Contribution shall be the excess of (1) the amount contributed over (2) the amount that would have been contributed had there not occurred a mistake of fact or had the deduction not been disallowed. Earnings attributable to the excess Discretionary Contribution, Matching Contribution or Pre-Tax Contribution shall not be returned to the contributing Employer, but losses attributable thereto shall reduce the amount of such Discretionary Contribution, Matching Contribution or Pre-Tax Contribution to be so returned. Furthermore, if the withdrawal of the amount attributable to the mistaken Discretionary Contribution, Matching Contribution or Pre-Tax Contribution would cause the balance of a Participant’s Account to be reduced to an amount which is less than the balance which would have been in said Account had the mistaken Discretionary Contribution, amount not been contributed, then the amount to be returned to the Employer under this Section will be reduced so as to avoid any such reduction.    69    ARTICLE 19. - TOP HEAVY PLAN RULES  19.01 Definitions. As used in this Article 19:  19.01(1) “Defined Benefit Plan” means any plan that is not a Defined Contribution Plan.  19.01(2) “Defined Contribution Plan” shall have the meaning set forth in Subsection 5.08(2).  19.01(3) “Determination Date” means with respect to any Plan Year, the last day of the preceding Plan Year, except that in the case of the first Plan Year of any plan, the last day of such first Plan Year.  19.01(4) “Key Employee” means any Employee or former Employee (including any deceased Employee) who at any time during the Plan Year that includes the Determination Date was an officer of the Employer having Limitation Year Compensation greater than $130,000 (as adjusted under section 416(i)(1) of the Code for Plan Years beginning after December 31, 2002), a 5-percent owner of the Employer, or a 1-percent owner of the Employer having Limitation Year Compensation of more than $150,000. For this purpose, Limitation Year Compensation means Compensation within the meaning of section 415(c)(3) of the Code. The determination of who is a Key Employee will be made in accordance with section 416(i)(1) of the Code and the applicable regulations and other guidance of general applicability issued thereunder.  19.01(5) “Key Employee Participant” means a Participant in this Plan who is a Key Employee.  19.01(6) “Limitation Year Compensation” shall have the meaning set forth in Subsection 5.08(5), except that if the Limitation Year and the Plan Year under the applicable plan are not the same, then for purposes of this Article 19, “Plan Year” shall be substituted for “Limitation Year” every place it occurs in Subsection 5.08(5).  19.01(7) “Non-Key Employee” means any person employed or formerly employed by any Affiliated Company, including the Beneficiaries of any such person, who is not a Key Employee.  19.01(8) “Permissive Aggregation Group” means the Required Aggregation Group, plus any other plan or plans of any Affiliated Company selected by the Company, provided that such selected plans, when considered as a group with the Required Aggregation Group, would continue to satisfy the requirements of Code sections 401(a)(4) and 410.  19.01(9) “Required Aggregation Group” means the group of plans consisting of: (i) all tax qualified plans maintained by the Employers or Affiliated Companies in which at least one Key Employee participates in the Plan Year containing the Determination Date, or any of the four (4) preceding Plan Years, and (ii) any other tax qualified plan maintained by the Employers or Affiliated Companies which enables a plan described in clause (i) to meet the requirements of Code section 401(a)(4) or 410.    70    19.01(10) “Valuation Date” means: (i) in the case of this Plan or any other Defined Contribution Plan, the last day of the Plan Year for the appropriate plan and (ii) in the case of a Defined Benefit Plan, the date used for computing plan costs for minimum funding, regardless of whether a valuation is performed that year.  19.01(11) All of the definitions set forth in Article 2 and not set forth herein shall have the same meaning in this Article.  19.02 Determination of Top Heaviness.  19.02(1) This Plan shall be a “Top Heavy Plan” with respect to any Plan Year if, as of the Determination Date for said Plan Year, any of the following conditions exists:  (a) The Top Heavy Ratio for this Plan exceeds sixty percent (60%), and this Plan is part of a Required Aggregation Group or a Permissive Aggregation Group.  (b) This Plan is part of a Required Aggregation Group, but not part of a Permissive Aggregation Group, and the Top Heavy Ratio for the Required Aggregation Group exceeds sixty percent (60%).  (c) This Plan is part of a Required Aggregation Group and part of a Permissive Aggregation Group, and the Top Heavy Ratio for the Permissive Aggregation Group exceeds sixty percent (60%).  (d) The top-heavy requirements of section 416 of the Code and Article XVIII of the Plan shall not apply in any year beginning after December 31, 2001, in which the Plan consists solely of a cash or deferred arrangement which meets the requirements of section 401(k)(12) of the Code and matching contributions with respect to which the requirements of section 401(m)(11) of the Code are met.  19.02(2) The “Top Heavy Ratio” referred to in Subsection 19.02(1) shall be determined as follows:  (a) If the Employers or Affiliated Companies maintain or have maintained one or more Defined Contribution Plans but have never maintained a Defined Benefit Plan which has covered or could cover a Participant in this Plan, the Top Heavy Ratio is a fraction, the numerator of which is the sum of the account balances under the Defined Contribution Plans for all Key Employees as of the Determination Date (including any part of any such account balance distributed in the five (5) year period ending on the Determination Date), and the denominator of which is the sum of all account balances under the Defined Contribution Plans for all participants as of the Determination Date (including any part of any such account balance distributed in the five (5) year period ending on the Determination Date). Both the numerator and the denominator of the Top Heavy Ratio shall be adjusted to reflect any contribution which is due but unpaid as of the appropriate Determination Date. In determining the account balances which have been distributed in the five (5) year period ending on the Determination Date, distributions under a terminated plan shall be included, provided such terminated plan, if it had not been terminated, would have been included in a Required Aggregation Group.    71    (b) For purposes of Subsections 19.02(3)(a) and (b), the value of account balances shall be determined as of the most recent Valuation Date that falls within or ends with the twelve (12) month period ending on the Determination Date. If any Participant was a Key Employee as set forth in Subsection 19.01(4) for any prior Plan Year, but such Participant ceases to be a Key Employee for any Plan Year, such Participant’s account balances and accrued benefits shall not be taken into account for purposes of determining whether or not this Plan is a Top Heavy Plan or a Super Top Heavy Plan as of the Determination Date of said Plan Year. Accounts shall be calculated to include all amounts attributable to both contributions by an Affiliated Company and contributions by persons employed by an Affiliated Company, but shall exclude amounts attributable to voluntary deductible contributions by said persons. The calculation of the Top Heavy Ratios, and the extent to which distributions, rollovers and transfers are taken into account shall be made in accordance with Code section 416 and the regulations thereunder. When aggregating plans for purposes of an Aggregation Group, the value of account balances will be calculated with reference to the Determination Dates that fall within the same calendar year. Notwithstanding the provisions of Subsections 19.02(3)(a) and (b), in determining the fractions referred to therein, there shall not be taken into account the account balances of any person who has not performed services for any Affiliated Company maintaining any Defined Contribution Plan referred to in such Subsections at any time during the five (5) year period ending on the Determination Date.  19.03 Minimum Requirements. Notwithstanding any other provision of this Plan to the contrary, if the Plan is a Top Heavy Plan for any Plan Year, then the following provisions shall apply:  19.03(1) Vesting. Any Participant who is credited with an Hour of Service in the first Plan Year in which the Plan is a Top Heavy Plan, or in any subsequent Plan Year after such first Plan Year (whether or not the Plan is a Top Heavy Plan in such subsequent Plan Year) shall have his percentage of vested benefits owing upon a Termination of Employment determined pursuant to the following schedule, in lieu of the schedule set forth in Section 10.01:            Vesting Years of Service    Percentage    Less than 2 years    0 %     2 years but less than 3 years    20 %     3 years but less than 4 years    40 %     4 years but less than 5 years    60 %     5 years but less than 6 years    80 %     6 years or more    100 %  Notwithstanding the foregoing, for Participants hired before January 1, 1989, their vested percentage shall be one percent (1%) rather than zero percent (0%) prior to being credited with two (2) Vesting Years of Service.    72    19.03(2) Accrual Benefits. The following two paragraphs shall apply for purposes of determining the present value of accrued benefits and the amounts of Account balances of Employees as of the Determination Date.  (a) The present values of accrued benefits and the amounts of Account balances of an Employee as of the Determination Date shall be increased by the distributions made with respect to the Employee under the Plan and any plan aggregated with the Plan under section 416(g)(2) of the Code during the 1-year period ending on the Determination Date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under section 416(g)(2)(A)(i) of the Code. In the case of a distribution made for a reason other than severance from employment, death, or disability, this provision shall be applied by substituting ‘5-year period’ for ‘1-year period.’  (b) Employees not performing services during year ending on the Determination Date. The accrued benefits and Accounts of any individual who has not performed services for the Employer during the 1-year period ending on the Determination Date shall not be taken into account.  19.02(3) Employer matching contributions shall be taken into account for purposes of satisfying the minimum contribution requirements of section 416(c)(2) of the Code and the Plan. The preceding sentence shall apply with respect to matching contributions under the Plan or, if the Plan provides that the minimum contribution requirement shall be met in another plan, such other plan. Employer matching contributions that are used to satisfy the minimum contribution requirements shall be treated as matching contributions for purposes of the Actual Contribution Percentage test and other requirements of section 401(m) of the Code.  19.02(4) Required Minimum Allocation of Contributions. Except as otherwise provided in this Article 19 and notwithstanding any other provision of this Plan to the contrary, for any Plan Year in which the Plan is a Top Heavy Plan, the Matching Contributions allocated on behalf of each Participant who is a Non-Key Employee shall not be less than the lesser of: (i) three percent (3%) of such Participant’s Limitation Year Compensation or (ii) the largest percentage of Matching Contributions as a percentage of the Key Employee Participant’s Compensation, allocated on behalf of any Key Employee Participant for that Plan Year; provided, however, that the provisions of clause (ii) shall not apply to any plan included in a Required Aggregation Group if such plan enables a Defined Benefit Plan included in such Required Aggregation Group to meet the requirements of Code section 401(a)(4) or 410. The minimum allocation provided for herein shall be determined without taking into account contributions or benefits under Code Chapter 21 (relating to the Federal Insurance Contributions Act), Title II of the Social Security Act or any other federal or state law, and shall be made without regard to any contrary provisions of the Plan regarding the allocation of Matching Contributions to affected Participants which might otherwise result in such Participant being entitled to no allocation or a lesser allocation due to the Participant’s failure to complete one thousand (1,000) Hours of Service (or the equivalent) during the Plan Year, the Participant’s failure to make mandatory employee contributions or the Participant’s failure to earn a stated amount of Compensation; provided, however, that such minimum allocation shall not be required to be made on behalf of any Participant who is not actively employed by an Employer on the last day of the applicable Plan Year. For purposes of this Section 19.03, all Defined Contribution Plans required to be included in an Aggregation Group shall be treated as one plan. Pre-Tax Contributions on behalf     73     of Key Employee Participants are taken into account in determining the minimum contribution under this Subsection. On the other hand, Pre-Tax Contributions on behalf of Non-Key Employees may not be treated as a Matching Contribution for purposes of the minimum contribution or benefit requirement of Code section 416.  19.02(5) Minimum Required Benefit. The minimum benefit requirement shall be met in another plan (including another plan that consists solely of a cash or deferred arrangement which meets the requirements of section 401(k)(12) of the Code and matching contributions with respect to which the requirements of section 401(m)(11) of the Code are met). The top-heavy minimum benefit requirement of section 416(c) of the Code shall be met in accordance with Section 19.03.    74    ARTICLE 20. - MISCELLANEOUS  20.01 Effect of Bankruptcy and Other Contingencies Affecting an Employer. Neither the bankruptcy, receivership, insolvency, liquidation, dissolution, merger, consolidation or reorganization of an Employer, or any other eventuality affecting the Employer, shall terminate the Trust or render ineffectual this Plan or discharge any Employer from any liabilities to the Trust for which it shall already have become obligated, but the same shall continue in full force and effect as though such eventuality had not occurred; however, the Plan Administrator shall in such event be authorized hereby to make any and all rules and regulations not inconsistent with the purposes of the Plan as shall be necessary to deal with such change in the situation of the Plan and Trust.  20.02 Benefits Payable by Trust. All benefits payable under the Plan shall be paid or provided for solely from the Trust Fund. No Employer assumes any liability or responsibility therefor.  20.03 Withholding. The Plan Administrator shall determine whether or not federal income tax withholding is required with respect to any distribution or withdrawal hereunder, shall direct the Trustee to withhold any amounts required by law to be withheld, and shall furnish the Trustee with any information required by Treasury Regulations regarding withholding. Notwithstanding any other provision of this Plan to the contrary, all rights and benefits of a Participant, Beneficiary, or Alternate Payee are subject to withholding of any tax required by law to be withheld.  20.04 Provisions Hereof for Sole Benefit of Parties Hereto and Participants. All of the covenants, stipulations, and agreements contained in this Plan are and shall be for the sole and exclusive benefit of and binding upon the parties hereto, their successors and assigns, and the Participants and their Beneficiaries.  20.05 Article and Section Headings. The titles or headings of the respective Articles and Sections in this Plan are inserted merely for convenience and shall be given no legal effect.  20.06 Formal Action by Employer. Any formal action herein permitted or required to be taken by an Employer shall be:  20.06(1) if and when a partnership, by written instrument executed by one or more of its general partners or by written instrument executed by a person or group of persons who has been authorized by written instrument executed by one or more general partners as having authority to take such action;  20.06(2) if and when a proprietorship, by written instrument executed by the proprietor or by written instrument executed by a person or group of persons who has been authorized by written instrument executed by the proprietor as having authority to take such action;  20.06(3) if and when a corporation, by resolution of its board of directors or other governing board, or by written instrument executed by a person or group of persons who has been authorized by resolution of its board of directors or other governing board as having authority to take such action; or    75    20.06(4) if and when a joint venture, by written instrument executed by one of the joint venturers or by written instrument executed by a person or group of persons who has been authorized by written instrument executed by one of the joint venturers as having authority to take such action.  20.07 APPLICABLE LAW. THIS PLAN SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS TO THE EXTENT NOT PREEMPTED BY APPLICABLE FEDERAL LAW.  IN WITNESS WHEREOF, ClubCorp, Inc. has caused this Plan to be executed by its duly authorized representative this 10th day of September, 2003.          ClubCorp, Inc.     By:    /s/ John Longstreet  Title:   SVP, People Strategy    76      EX-10.28 7 dex1028.htm FIRST AMENDMENT TO THE CLUBCORP EMPLOYEE STOCK OWNERSHIP PLAN   First Amendment to the ClubCorp Employee Stock Ownership Plan   Exhibit 10.28  FIRST AMENDMENT TO THE  CLUBCORP EMPLOYEE STOCK OWNERSHIP PLAN  This Amendment is made generally effective as of January 1, 2003, by ClubCorp, Inc., a Delaware corporation, formerly ClubCorp International, Inc. (“ClubCorp”).  WITNESSETH:  WHEREAS, ClubCorp maintains the ClubCorp Employee Stock Ownership Plan (“ESOP”);  WHEREAS, ClubCorp amended and restated the ESOP, effective January 1, 2001;  WHEREAS, ClubCorp most recently amended and restated the ESOP, effective July 1, 2003;  WHEREAS, ClubCorp now desires to amend the ESOP to add the new minimum distribution rules required under Section 401(a)(9) of the Internal Revenue Code of 1986, as amended; and  WHEREAS, the ESOP may be amended by ClubCorp pursuant to the provisions of Article 15 of the ESOP.  NOW, THEREFORE, the ESOP is amended as follows, effective as of January 1, 2003:  1. Section 11.03 of the ESOP is amended by adding the following new sentence to the end of existing Section 11.03(3) of the ESOP, as follows:  “Notwithstanding any of the above, the minimum distribution requirements for Plan Years beginning on or after January 1, 2003 will be handled in accordance with the provisions of Section 11.08 of this Plan.”  3. Article 11 of the ESOP is amended by adding the following new Section 11.08 to the end of existing Article 11 of the ESOP, as follows:  “11.08 Minimum Distribution Requirements for Plan Years Beginning On or After January 1, 2003.  11.08(1) General Rules  (a) Effective Date. The provisions of this Section 11.08 will apply for purposes of determining required minimum distributions for calendar years beginning with the 2003 calendar year.  (b) Precedence. The requirements of this Section 11.08 will take precedence over any inconsistent provisions of the Plan.    (c) Requirements of Treasury Regulations Incorporated. All distributions required under this Article XI will be determined and made in accordance with the Treasury Regulations under Section 401(a)(9) of the Code.  (d) TEFRA Section 242(b)(2) Elections. Notwithstanding the other provisions of this Article XI, distributions may be made under a designation made before January 1, 1984, in accordance with Section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act (“TEFRA”) and the provisions of the Plan that relate to Section 242(b)(2) of TEFRA.  11.08(2) Time and Manner of Distribution  (a) Required Beginning Date. The Participant’s entire interest will be distributed, or begin to be distributed, to the Participant no later than the Participant’s Required Beginning Date.  (b) Death of Participant Before Distributions Begin. If the Participant dies before distributions begin, the Participant’s entire interest will be distributed, or begin to be distributed, no later than as follows:  (i) If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary, then distributions to the surviving spouse will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died, or by December 31 of the calendar year in which the Participant would have attained age 701/2, if later.  (ii) If the Participant’s surviving spouse is not the Participant’s sole designated Beneficiary, then distributions to the designated Beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died.  (iii) If there is no designated Beneficiary as of September 30 of the year following the year of the Participant’s death, the Participant’s entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.  (iv) If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary and the surviving spouse dies after the Participant but before distributions to the surviving spouse begin, this Section 11.08(2)(b), other than Section 11.08(2)(B)(i), will apply as if the surviving spouse were the Participant.  (v) For the purposes of Section 11.08(2)(b), the Participant or Beneficiaries may elect on an individual basis whether the  For purposes of this Section 11.08(2)(b) and Section 11.08(4), unless Section 11.08(2)(b)(iv) applies, distributions are considered to begin on the Participant’s Required Beginning Date. If Section 11.08(2)(b)(iv) applies,      distributions are considered to begin on the date distributions are required to begin to the surviving spouse under Section 11.08(2)(b)(i). If distributions under an annuity purchased from an insurance company irrevocably commence to the Participant before the Participant’s Required Beginning Date (or to the Participant’s surviving spouse before the date distributions are required to begin to the surviving spouse under Section 11.08(2)(b)(i)), the date distributions are considered to begin is the date distributions actually commence.  (c) Forms of Distribution. Unless the Participant’s interest is distributed in the form of an annuity purchased from an insurance company or in a single sum on or before the Required Beginning Date, as of the first Designated Beneficiary, distributions will be made in accordance with Sections 11.08(3) and 11.08(4) of this Article XI. If the Participant’s interest is distributed in the form of an annuity purchased from an insurance company, distributions thereunder will be made in accordance with the requirements of Section 401(a)(9) of the Code and the Treasury Regulations.  11.08(3) Required Minimum Distributions During Participant’s Lifetime.  (a) Amount of Required Minimum Distribution For Each Distribution Calendar Year. During the Participant’s lifetime, the minimum amount that will be distributed for each Designated Beneficiary is the lesser of:  (i) the quotient obtained by dividing the Participant’s Account Balance by the distribution period in the Uniform Lifetime Table set forth in Section 1.401(a)(9)-9 of the Treasury Regulations, using the Participant’s age as of the Participant’s birthday in the Designated Beneficiary; or  (ii) if the Participant’s sole designated Beneficiary for the Designated Beneficiary is the Participant’s spouse, the quotient obtained by dividing the Participant’s Account Balance by the number in the Joint and Last Survivor Table set forth in Section 1.401(a)(9)-9 of the Treasury Regulations, using the Participant’s and spouse’s attained ages as of the Participant’s and spouse’s birthdays in the Designated Beneficiary.  (b) Lifetime Required Minimum Distributions Continue Through Year of Participant’s Death. Required minimum distributions will be determined under this Section 11.08(3) beginning with the first Designated Beneficiary and up to and including the Designated Beneficiary that includes the Participant’s date of death.  11.08(4) Required Minimum Distributions After Participant’s Death.  (a) Death On or After Date Distributions Begin.  (i) Participant Survived by Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is      a designated Beneficiary, the minimum amount that will be distributed for each Designated Beneficiary after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account Balance by the longer of the remaining Life Expectancy of the Participant or the remaining Life Expectancy of the Participant’s designated Beneficiary, determined as follows:  The Participant’s remaining Life Expectancy is calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.  If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary, the remaining Life Expectancy of the surviving spouse is calculated for each Designated Beneficiary after the year of the Participant’s death using the surviving spouse’s age as of the spouse’s birthday in that year. For Designated Beneficiarys after the year of the surviving spouse’s death, the remaining Life Expectancy of the surviving spouse is calculated using the age of the surviving spouse as of the spouse’s birthday in the calendar year of the spouse’s death, reduced by one for each subsequent calendar year.  If the Participant’s surviving spouse is not the Participant’s sole designated Beneficiary, the designated Beneficiary’s remaining Life Expectancy is calculated using the age of the Beneficiary in the year following the year of the Participant’s death, reduced by one for each subsequent year.  (ii) No Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is no designated Beneficiary as of September 30 of the year after the year of the Participant’s death, the minimum amount that will be distributed for each Designated Beneficiary after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account Balance by the Participant’s remaining Life Expectancy calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.  (b) Death Before Date Distributions Begin.  (i) Participant Survived by Designated Beneficiary. If the Participant dies before the date distributions begin and there is a designated Beneficiary, the minimum amount that will be distributed for each Designated Beneficiary after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account Balance by the remaining Life Expectancy of the Participant’s designated Beneficiary, determined as provided in Section 11.08(4)(a).  (ii) No Designated Beneficiary. If the Participant dies before the date distributions begin and there is no designated Beneficiary as of September 30 of the year following the year of the Participant’s death, distribution of the Participant’s entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.    (iii) Death of Surviving Spouse Before Distributions to Surviving Spouse Are Required to Begin. If the Participant dies before the date distributions begin, the Participant’s surviving spouse is the Participant’s sole designated Beneficiary, and the surviving spouse dies before distributions are required to begin to the surviving spouse under Section 11.08(2)(b)(i), this Section 11.08(4)(b) will apply as if the surviving spouse were the Participant.  (c) Election to Allow a Designated Beneficiary Receiving Distributions Under 5-Year Rule to Elect Life Expectancy Distributions. A designated Beneficiary who is receiving payments under the 5-year rule may make a new election to receive payments under the Life Expectancy rule until December 31, 2003, provided that all amounts that would have been required to be distributed under the Life Expectancy rule for all Designated Beneficiarys before 2004 are distributed by the earlier of December 31, 2003 or the end of the 5-year period.  11.08(5) Election to Allow Participants or Beneficiaries to Elect 5-Year Rule. Notwithstanding anything to the contrary, Participants or Beneficiaries may elect, on an individual basis, whether the 5-year rule in Section 11.08(2)(b) or the Life Expectancy rule in Section 11.08(4)(b) applies to distributions after the death of a Participant who has a designated Beneficiary. The election must be made no later than the earlier of September 30 of the calendar year in which distribution would be required to begin under Section 11.08(2)(b), or by September 30 of the calendar year which contains the fifth anniversary of the Participant’s (or, if applicable, surviving spouse’s) death. If neither the Participant nor Beneficiary makes an election under this Section 11.08(5), distributions will be made in accordance with Sections 11.08(2)(b) and 11.08(4)(b) and, if applicable, the elections in Section 11.08(2) above.  11.08(6) Definitions.  (a) “Designated Beneficiary.” The individual who is designated as the Beneficiary under the Plan and is the designated Beneficiary under Section 401(a)(9) of the Code and Section 1.401(a)(9)-1, Q&A-4, of the Treasury Regulations.  (b) “Distribution Calendar Year.” A calendar year for which a minimum distribution is required. For distributions beginning before the Participant’s death, the first Designated Beneficiary is the calendar year immediately preceding the calendar year which contains the Participant’s Required Beginning Date. For distributions beginning after the Participant’s death, the first Designated Beneficiary is the calendar year in which distributions are required to begin under Section 11.08(2)(b). The required minimum distribution for the Participant’s first Designated Beneficiary will be made on or before the Participant’s Required Beginning Date. The required minimum distribution for other Designated Beneficiarys, including the required minimum distribution for the Designated Beneficiary in which the Participant’s Required Beginning Date occurs, will be made on or before December 31 of that Designated Beneficiary.    (c) “Life Expectancy.” Life Expectancy as computed by use of the Single Life Table in Section 1.401(a)(9)-9 of the Treasury Regulations.  (d) “Participant’s Account Balance.” The Account balance as of the last Valuation Date in the calendar year immediately preceding the Designated Beneficiary (valuation calendar year) increased by the amount of any contributions made and allocated or Forfeitures allocated to the Account balance as of dates in the valuation calendar year after the Valuation Date and decreased by distributions made in the valuation calendar year after the Valuation Date. The Account balance for the valuation calendar year includes any amounts rolled over or transferred to the Plan either in the valuation calendar year or in the Designated Beneficiary if distributed or transferred in the valuation calendar year.”  IN WITNESS WHEREOF, the Company has executed this First Amendment to the ESOP in multiple copies on this 14th day of October, 2003, to be effective as set forth herein.          CLUBCORP, INC.     By:    /s/ John Longstreet  Title:   SVP, People Strategy      EX-10.29 8 dex1029.htm SECOND AMENDMENT TO THE CLUBCORP EMPLOYEE STOCK OWNERSHIP PLAN   Second Amendment to the ClubCorp Employee Stock Ownership Plan   Exhibit 10.29  SECOND AMENDMENT TO THE  CLUBCORP EMPLOYEE STOCK OWNERSHIP PLAN  This Amendment is made generally effective as of March 28, 2005, by ClubCorp, Inc., a Delaware corporation, formerly ClubCorp International, Inc. (“ClubCorp”).  WITNESSETH:  WHEREAS, ClubCorp maintains the ClubCorp Employee Stock Ownership Plan (“ESOP”);  WHEREAS, ClubCorp amended and restated the ESOP, effective January 1, 2001;  WHEREAS, ClubCorp most recently amended and restated the ESOP, effective July 1, 2003;  WHEREAS, ClubCorp amended the ESOP, effective January 1, 2003 to add the new minimum distribution rules required under Section 401(a)(9) of the Internal Revenue Code of 1986, as amended; and  WHEREAS, ClubCorp now desires to amend the ESOP to include revisions in the law regarding mandatory distributions, payment of monthly fees and the process for lost participants.  WHEREAS, the ESOP may be amended by ClubCorp pursuant to the provisions of Article 15 of the ESOP.  NOW, THEREFORE, the ESOP is amended as follows, effective as of March 28, 2005:  1. Article 2 of the ESOP is amended by deleting the last sentence in Section 2.20.  2. Article 11 of the ESOP is amended by adding the following sentence to Section 11.02(4):  “In the event of a mandatory distribution greater than $1,000 and less than $5000, in accordance with the provisions of Article 11, if the Participant does not elect to have such distribution paid directly to an eligible retirement plan specified by the Participant in a direct rollover or to receive the distribution directly in accordance with Sections 11.01 and 11.07, then the Plan Administrator will pay the distribution in a direct rollover to an individual retirement plan designated by the Plan Administrator.”  3. Article 12 of the ESOP is amended by deleting Sections 12.06(1) and (2) in their entirety and substituting the following:  “12.06(1) Neither the Trustee nor the Plan Administrator shall be obliged to search for, or ascertain the whereabouts of any Participant, Beneficiary or Alternate Payee. The Plan Administrator, by regular first-class U.S. mail addressed to such Participant’s, Beneficiary’s or Alternate Payee’s last known     1     address, shall notify the Participant, Beneficiary or Alternate Payee that such Participant, Beneficiary or Alternate Payee is entitled to a distribution under this Plan, and the notice shall explain the provisions of this Section 12.06.  12.06(2) The Plan Administrator shall utilize the Internal Revenue Service’s letter-forwarding program set forth in Revenue Procedure 94-22 (or as amended by the Internal Revenue Service) for all Participants, Beneficiarys and Alternate Payees who do not claim a distribution or payment within ninety (90) days of the date of the letter sent under Section 12.06(1). Any distribution or payment which is not claimed by the person entitled thereto within six (6) months from the date the Plan Administrator requested the letter-forwarding service, shall be forfeited and the forfeited amounts added to Forfeitures. Should any such person make a claim, at any time prior to termination of the Plan and final distribution thereunder, which is approved by the Plan Administrator, such benefit shall be restored as follows: An amount equal to the amount previously forfeited (but without interest on such amount for the period from the date of such forfeiture to the date of such restoration) shall be specially allocated from Forfeitures in the current Plan Year for the benefit of such Participant or Beneficiary. Immediately upon allocation to such Participant or Beneficiary, the Plan Administrator shall instruct the Trustee to distribute in a lump sum, directly to such Participant or Beneficiary, the amount specially allocated to such Participant or Beneficiary.”  4. Article 13 of the ESOP is amended by adding the following in Section 13.15:  “Effective July 1, 2005, if a Participant has a Termination of Employment and elects to defer distribution of his nonforfeitable Account balance, the current monthly participant fee shall be paid in full from the Participant’s account until the entire nonforfeitable Account balance is distributed in accordance with Article 11 herein.”  IN WITNESS WHEREOF, the Company has executed this First Amendment to the ESOP in multiple copies on this 10th day of October, 2005, to be effective as set forth herein.          CLUBCORP, INC.     By:    /s/ John Longstreet  Title:   SVP, People Strategy    2      EX-10.30 9 dex1030.htm THIRD AMENDMENT TO THE EMPLOYEE STOCK OWNERSHIP PLAN   Third Amendment to the Employee Stock Ownership Plan   Exhibit 10.30  THIRD AMENDMENT TO THE  CLUBCORP EMPLOYEE STOCK OWNERSHIP PLAN  This Amendment is made to be effective January 1, 2006, by ClubCorp, Inc., a Delaware corporation, formerly ClubCorp International, Inc. (“ClubCorp”).  WITNESSETH:  WHEREAS, ClubCorp maintains the ClubCorp Employee Stock Ownership Plan (“ESOP”);  WHEREAS, ClubCorp amended and restated the ESOP, effective January 1, 2001;  WHEREAS, ClubCorp most recently amended and restated the ESOP, effective July 1, 2003;  WHEREAS, ClubCorp now desires to amend the ESOP to change the trustee provisions to increase the discretion of the Trustees of the Plan; and  WHEREAS, the ESOP may be amended by ClubCorp pursuant to the provisions of Article 15 of the ESOP.  NOW, THEREFORE, the ESOP is amended as follows, effective January 1, 2006:  1. Existing Sections 6.01(2) and 6.01(3) are deleted in their entirety and the following is substituted in their place:  “6.01(2) Notwithstanding anything to the contrary contained herein, Company Stock shall be valued as of each Semiannual Valuation Date by an independent appraiser selected and retained by the Trustee; provided, however, that in the event Company Stock is traded on a generally recognized market, the foregoing sentence shall not apply. Allocations pursuant to Article 5 shall use the most current available valuation of Company Stock.  6.01(3) The Trustee’s (or in the case of Company Stock, the appraiser’s) determination of the Current Value of the assets in the Trust Fund and the Plan Administrator’s charges or credits to the individual Accounts with respect to Participants, Beneficiaries, or Alternate Payees, as provided in Section 6.02, shall be final and conclusive on all persons ever interested hereunder.”    2. Existing Sections 6.03 and 6.04 are deleted in their entirety and the following is substituted in their place:  “6.03 Trust Fund. The Trust shall be invested in Company Stock (which is a qualifying employer security within the meaning of ERISA); provided, however, that to the extent the Trustee determines it is required under ERISA to do so, or cash is needed for administrative expenses, withdrawals, diversification elections, or distributions, and except as otherwise provided in the Trust Agreement, assets of the Trust Fund shall be invested in investments other than Company Stock. All purchases of qualifying employer securities, including Company Stock, shall be for no more than the fair market value, as determined in good faith by the Trustee in reliance upon an appraisal submitted by an independent appraiser selected and retained by the Trustee, and no commission shall be charged with respect to any purchase from a party in interest.  6.04 Voting of Shares. Shares of Company Stock in the Trust shall be voted by the Trustee in accordance with this Section. In the event the Company Stock is required to be registered under Section 12 of the Securities Exchange Act of 1934, each Participant will be entitled to give confidential instructions to the Trustee as to the voting of all shares of Company Stock then allocated to his Company Stock Account (as outlined above) as to all corporate matters requiring a shareholder vote. With respect to any corporate matter which involves the voting of such shares at a shareholder meeting and which constitutes a merger, consolidation, recapitalization, reclassification, liquidation, dissolution, sale of substantially all assets of a trade or business or a similar transaction specified in regulations under Section 409(e)(3) of the Code, each Participant (or Beneficiary) will be entitled to give confidential instructions to the Trustee as to the voting of shares of Company Stock then allocated to his Company Stock Account regardless of whether Company Stock is required to be registered. In either event, any allocated Company Stock with respect to which voting directions are not given shall be voted, and shares of Company Stock held by the Trust which are not then allocated to Participants’ Company Stock Accounts shall be voted in the manner determined by the Trustee.”  3. Existing Section 6.08 is deleted in its entirety and the following is substituted in its place:  “6.08 Emergency Valuation. Subject to Section 6.01(2), it is contemplated that the Trust will be valued and allocations made only as of each Allocation Date. However, should the Plan Administrator in good faith determine that, because of an extraordinary change in general economic conditions or the occurrence of an event radically affecting the value of all or a substantial part of the Trust, an abnormal fluctuation in the value of the Trust has occurred since the preceding Allocation Date, and that it has become necessary to make a distribution to one (1) or more Participants, Beneficiaries, or Alternate Payees under the provisions hereof, the Plan Administrator may, in its sole discretion, to prevent any    2    such person from receiving a substantially greater or lesser amount than what he would be entitled to, based on the current value of the Trust (as defined in ERISA Section 3(26)), cause a revaluation of the Trust to be made and a reallocation of the interests therein as of the date such person’s right of distribution becomes fixed. The Plan Administrator’s determination to make such emergency valuation and the valuation of the Trust as determined by the Trustee (or in the case of Company Stock, by the independent appraiser selected by the Trustee) shall be conclusive and binding on all persons ever interested hereunder.”  4. Existing Section 13.05 is deleted in its entirety and the following is substituted in its place:  “13.05 Authority of Plan Administrator. The Plan Administrator is authorized to take such actions as may be necessary to carry out the provisions and purposes of the Plan and shall have the authority to control and manage the operation and administration of the Plan. In order to effectuate the purposes of the Plan, the Plan Administrator shall have the discretionary power to construe and interpret the Plan, to supply any omissions therein, to reconcile and correct any errors or inconsistencies, to decide any questions in the administration and application of the Plan, to recover in any manner authorized by law any payments erroneously or wrongfully made from the Plan to Participants or any other person or entity, and to make equitable adjustments for any mistakes or errors made in the administration of the Plan. All such actions or determinations made by the Plan Administrator, and the application of rules and regulations to a particular case or issue by the Plan Administrator, in good faith, shall not be subject to review by anyone, but shall be final, binding, and conclusive on all persons ever interested hereunder. In construing the Plan and in exercising its power under provisions requiring Plan Administrator approval, the Plan Administrator shall attempt to ascertain the purpose of the provisions in question and when such purpose is known or reasonably ascertainable, such purpose shall be given effect to the extent feasible. Likewise, the Plan Administrator is authorized to determine all questions with respect to the individual rights of all Participants and their Beneficiaries and Alternate Payees under this Plan, including, but not limited to, all issues with respect to eligibility, Compensation, service, allocation of consolidated contributions and Trust Fund earnings, and retirement or Termination of Employment, and shall direct the Trustee concerning the allocation, payment and distribution of all funds held in trust for purposes of the Plan. The Plan Administrator, in the exercise of any discretionary powers hereunder, shall not exercise that discretion so as to discriminate in favor of Highly Compensated Employees. The Plan Administrator shall establish investment objectives and monitor, or cause to be monitored, the investment performance of the Trustee or any Investment Manager which may be appointed with respect to any assets of the Plan.”    3    IN WITNESS WHEREOF, the Company has executed this Third Amendment to the ESOP in multiple copies on this 23rd day of March, 2006, to be effective as set forth herein.           CLUBCORP, INC.     By:    /s/ Tom Henslee  Title:   EVP, Secretary and General Counsel  The Trustees consent to the provisions of this Third Amendment that affect their duties and responsibilities.        TRUSTEES:     /s/ Murray Siegel  Murray Siegel     /s/ Jack Lupton  Jack Lupton     /s/ Dave Woodyard  Dave Woodyard     /s/ Mary Cowser  Mary Cowser    4      EX-21.1 10 dex211.htm SUBSIDIARIES OF CLUBCORP, INC.   Subsidiaries of ClubCorp, Inc.   Exhibit 21.1  SUBSIDIARIES OF THE REGISTRANT      1. ClubCorp, Inc.        a) Operating in the hospitality line of business        b) Names of:        i) 321 consolidated wholly owned subsidiaries operating in the United States have been omitted; and        ii) 24 consolidated wholly owned subsidiaries operating in foreign countries have been omitted.      EX-23.1 11 dex231.htm CONSENT OF KPMG LLP   Consent of KPMG LLP   Exhibit 23.1  CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  The Board of Directors  ClubCorp, Inc.:  We consent to incorporation by reference in the registration statements (Nos. 33-96568, 33-89818, 333-08041, 333-57107, 333-52612 and 333-110521) on Form S-8 of ClubCorp, Inc. of our report dated March 29, 2004, except for Note 11 which is as of April 12, 2005, with respect to the consolidated statements of operations, stockholders’ equity and comprehensive income (loss), and cash flows of ClubCorp, Inc. and subsidiaries for the year ended December 30, 2003, which report appears in the December 27, 2005, annual report on Form 10-K of ClubCorp, Inc.        /s/ KPMG LLP    Dallas, Texas  March 24, 2006      EX-23.2 12 dex232.htm CONSENT OF HOULIHAN LOKEY HOWARD AND ZUKIN FINANCIAL ADVISORS, INC.   Consent of Houlihan Lokey Howard and Zukin Financial Advisors, Inc.   Exhibit 23.2  Houlihan Lokey Howard & Zukin Financial Advisors (Letterhead)  March 24, 2006  Mrs. Angela A. Stephens  Senior Vice President and  Chief Accounting Officer  ClubCorp, Inc.  3030 LBJ Freeway, Suite 500  Dallas, TX 75234-7703  Dear Mrs. Stephens:  We hereby consent to the references to our firm that appear in the Form 10-K for ClubCorp, Inc. for the fiscal year ended December 27, 2005, relating to our independent opinion on the fair market value of the Company’s common stock, and to the incorporation by reference in the registration statement (Nos. 33-96568, 33-89818, 333-08041, 333-57107, 333-52612 and 333-110521) on Form S-8 of ClubCorp, Inc.  Sincerely,         /s/ Michael Deluke  Michael DeLuke  Vice President  MD:slc      EX-23.3 13 dex233.htm CONSENT OF DELOITTE & TOUCHE LLP   Consent of Deloitte & Touche LLP   Exhibit 23.3  CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  We consent to the incorporation by reference in Registration Statements Nos. 333-52612 and 333-110521 of ClubCorp, Inc. on Form S-8; Post-Effective Amendment No.1 to Registration Statements Nos. 33-89818, 333-08041, and 333-57107 on Form S-8; and Post-Effective Amendment No. 3 to Registration Statement No. 33-96568 on Form S-8 of our report dated March 24, 2006, relating to the consolidated financial statements of ClubCorp, Inc. appearing in the Annual Report on Form 10-K of ClubCorp, Inc. for the year ended December 27, 2005.        /s/ DELOITTE & TOUCHE LLP    Dallas, Texas  March 24, 2006      EX-24.1 14 dex241.htm POWER OF ATTORNEY   Power of Attorney   EXHIBIT 24.1  POWER OF ATTORNEY  KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Angela A. Stephens, his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K of ClubCorp, Inc. for the year ended December 27, 2005, together with any amendments thereto, and to file the same with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.  Pursuant to the requirements of the Securities Act of 1934, as amended, this Power of Attorney has been signed by the following persons in the capacities and on the dates indicated:             Signature    Title    Date       /s/ Robert H. Dedman, Jr. Robert H. Dedman, Jr.   Chairman of the Board   March 3, 2006       /s/ John A. Beckert John A. Beckert   Chief Executive Officer and President   March 3, 2006       /s/ Nancy M. Dedman Nancy M. Dedman   Director   March 3, 2006       /s/ Patricia Dedman Dietz Patricia Dedman Dietz   Director   March 3, 2006       /s/ Bahram shirazi Bahram Shirazi   Director   March 3, 2006       /s/ James Stern James Stern   Director   March 3, 2006      EX-31.1 15 dex311.htm SECTION 302 CEO CERTIFICATION   Section 302 CEO Certification   Exhibit 31.1  CERTIFICATION  I, John A. Beckert, Chief Executive Officer of ClubCorp, Inc. (the “Registrant”) certify that:      1. I have reviewed this annual report on Form 10-K of ClubCorp, Inc.;      2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;      3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report;      4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:        a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;        b. (paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986);        c. evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and        d. disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and      5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent function):        a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and        b. any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.            Date: March 24, 2006   By:    /s/ John A. Beckert        John A. Beckert        Chief Executive Officer and President      EX-31.2 16 dex312.htm SECTION 302 CFO CERTIFICATION   Section 302 CFO Certification   Exhibit 31.2  CERTIFICATION  I, Jeffrey P. Mayer, Chief Financial Officer of ClubCorp, Inc. (the “Registrant”), certify that:      1. I have reviewed this annual report on Form 10-K of ClubCorp, Inc.;      2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;      3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report;      4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:        a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;        b. (paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986);        c. evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and        d. disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and      5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent function):        a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and        b. any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.            Date: March 24, 2006   By:    /s/ Jeffrey P. Mayer        Jeffrey P. Mayer        Chief Financial Officer      EX-32.1 17 dex321.htm SECTION 906 CEO CERTIFICATION   Section 906 CEO Certification   Exhibit 32.1  Exhibit 32.1 – Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  In connection with the filing of the Annual Report on Form 10-K for the Year Ended December 27, 2005 (the “Report”) by ClubCorp, Inc. (“Registrant”), the undersigned hereby certifies that, to the best of his knowledge:        1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and        2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant.          Date: March 24, 2006    /s/ John A. Beckert     John A. Beckert     Chief Executive Officer and President  A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.      EX-32.2 18 dex322.htm SECTION 906 CFO CERTIFICATION   Section 906 CFO Certification   Exhibit 32.2  Exhibit 32.2 – Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  In connection with the filing of the Annual Report on Form 10-K for the Year Ended December 27, 2005 (the “Report”) by ClubCorp, Inc. (“Registrant”), the undersigned hereby certifies that; to the best of his knowledge:        1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and        2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant.          Date: March 24, 2006    /s/ Jeffery P. Mayer     Jeffrey P. Mayer     Chief Financial Officer  A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.      GRAPHIC 19 g76781image001.jpg GRAPHIC  begin 644 g76781image001.jpg M_]C_X``02D9)1@`!`@``9`!D``#_[``11'5C:WD``0`$````9```_^X`#D%D M;V)E`&3``````?_;`(0``0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$! 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